Cloud Infrastructure Growth Fueled by Server and Storage Price Hikes

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Abstract means to be created outside of any conventions or norms that apply to whatever it is, but abstraction technology is entirely different. It is the technology by which a programmer hides everything except relevant data about an object, and the aim with is to reduce complexity. Abstraction technology has been integral to the development of cloud computing, and of course we don’t need to go on even a bit about how it has so wholly changed the landscape of the digital world and business within it to a great extent.

With regards to cloud infrastructure, virtualization is a key part of how it is possible to set up a cloud environment and have it function the way it does. Virtualization is an abstraction technology itself, and it separates resources from physical hardware and pools them into clouds. For there the software that takes direction of those resources is known as a hypervisor, where the machine’s CPU power, memory, and storage are then virtualized themselves. It was almost unheard of for hypervisors to be maxed out for the early years of cloud computing. Not anymore.

This leads to a different angle on why cloud infrastructure growth continues full force even though it’s becoming more challenge in relation to the expense of it. This is a topic that any good Canadian web hosting provider is going to take an interest in and that’s the case for those of us here at 4GoodHosting too. Servers are part of hardware of course, and the way virtualization can connect two servers together without any literal physical connection at all is at the very center of what makes cloud storage so great.

The mania surrounding AI as well as the impact of inflation have pushed cloud spending even more, and the strong contributing factors to that are what we’re going to lay out here today.

Componentry Differences

Spending on computer and storage infrastructure products in the first quarter increased to $21.5 billion last year, and this year spending on cloud infrastructure continues to outpace the non-cloud segment, which declined 0.9% in 1Q23 to $13.8 billion. Unit demand went down 11.4%, but average selling prices grew 29.7%.

The explanation for these gains seems to be that the soaring prices are likely from a combination of inflationary pressure as well as a higher concentration of more expensive, GPU-accelerated systems being deployed by cloud service providers. AI is factoring in two, with unit sales for servers down for the first time in almost two decades and prices up due to the arrival of dedicated AI servers with expensive GPUs in them.

The $15.7 billion spent on cloud infrastructure in the first quarter of 2023 is a gain of 22.5% compared to a year ago. Continuing strong demand for shared cloud infrastructure is expected, and it is predicted to surpass non-cloud infrastructure in spending within this year. So we can look for the cloud market to expand while the non-cloud segment will contract with enterprise customers shifting towards capital preservation.

Super Mega

A dip in the sales of servers and storage for hosting under rental/lease programs is notable here too. That segment declined 1.5% to $5.8 billion, but the fact that over the previous 12 months sales of gear into dedicated cloud use has gone up 18+% makes it fairly clear that was an aberration. The increasing migration of services to the cloud is also a reflection of how on-premises sales continue to slow while cloud sales increase

Spending on cloud infrastructure is expected to have a compound annual growth rate (CAGR) in the vicinity of 11% over the 2022-2027 forecast period, with estimates that it will reach $153 billion in 2027 and if so making up for 69% of the total spent on computer and storage infrastructure We’ll conclude for this week by mentioning again just how front and center AI is in all of this. It is extremely compute- and storage-intensive nature makes it expensive, and many firms now have AI-ready implementation as a top priority. A survey found that 47% of companies are making AI their top spending area in technology over the next calendar year.

Continued Growth of Ethernet as Tech Turns 50

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Wired connections will have some people immediately thinking of dial-up modems and the like from the early days of Internet connectivity, but that is really not how it should be considering that Ethernet has in no way gone the way of the Dodo bird. Or AOL for that matter, but what we’re setting up for here is a discussion where we explain how Ethernet connectivity is still entirely relevant even though maybe not as much as when it made its functional arrival 50 years ago.

That’s right, it took quite some time before the applications of the technology become commonplace the way it did in the early to mid-1990s and some of us are old enough to remember a time when making the physical connection was the only option. And it’s entirely true to say that doing so continues to have some very specific advantages, and that can segue easily into a similar discussion about how large cloud data centers rely so completely on the newest variations of Ethernet technology.

Both topics are always going be in line with what we take interest in here at 4GoodHosting given we’re one of the many good Canadian web hosting providers. We’ve had previous entries where we’ve talked about Wi-Fi 6 and other emerging technologies, so now is an ideal time to talk about just how integral Ethernet technology advances have been for Cloud computing.

Targeted Consolidation

Ethernet was invented in 1973, and since then it has continuously been expanded and adapted to become the go-to Layer 2 protocol in computer networking across industries. There is real universality to it as it has been deployed everywhere from under the oceans to out in space. Ethernet use cases also continue to expand with new physical layers, and high-speed Ethernet for cameras in vehicles is one of a few good examples.

But where there is likely the most impact for Ethernet right now is at this point is with large cloud data centers. The way growth there has included interconnecting AI/ML clusters that are ramping up quickly adds to the fanfare that Ethernet connectivity is enjoying. And it has a wide array of other potential applications and co-benefits too.

Flexibility and adaptability are important characteristics of the technology, and in many ways it has become the default answer for any communication network. Whether that is for connecting devices or computers, in nearly all cases inventing yet another network is not going to be required.

Ethernet also continues to be a central functioning component for distributed workforces, something that has more of an emphasis on it since Covid. Communication service provider were and continue to be under pressure to make more bandwidth available, and the way in which Ethernet is the foundational technology used for the internet and enabled individuals to carry out a variety of tasks efficiently from the comfort of their own homes is something we took note of.

Protocol Fits

Ethernet is also a more capable replacement for legacy Controller Area Network (CAN) and Local Interconnect Network (LIN) protocols, and for that reason it has become the backbone of in-vehicle networks implemented in cars and drones. Ethernet also grew to replace storage protocols, and the world’s fastest supercomputers continue to be backed by Ethernet nearly exclusively. Bus units for communication across all industries are being replaced by Ethernet, and a lot of that has to do with the simplicity of cabling.

Ethernet is also faster, cheaper, easier to troubleshoot because embedded NICs in motherboards, ethernet switches that can be of any size or speed, jumbo-frame Gigabit Ethernet NIC cards, and smart features like Ether Channel The ever-increasing top speed of Ethernet does demand a lot of attention, but there are focuses on the development and enhancement slower speed 2.5Gbps, 5Gbps, and 25Gbps Ethernet, and even the expansion of wireless networks will require more use of Ethernet. Remember that wireless doesn’t exist without wired and wireless access points require a wired infrastructure. Each massive-scale data center powering the cloud, AI, and other technologies of the future are all connected together by wires and fiber and originating from Ethernet switches.