Welcome back to Forecast Fridays, where we predict
the latest trends and projections in the tech industry. In this
edition, we turn our attention to the enterprise servers and storage
markets, both of which faced challenges in the fourth quarter of 2023.
Q4 2023 Performance Recap: Servers and Storage Face Headwinds
As anticipated, Q4 2023 proved to be a
challenging period for both enterprise servers and storage. Server
revenues experienced a substantial decline of 27.2% year–over–year
(YoY). This drop was attributed to various factors, including
unfavourable YoY comparisons with Q4 2022, lower prices in specific
component categories compared to the end of 2022, and soft demand
due to economic uncertainties.
However, the situation was slightly more
optimistic than our forecast, with government tenders in Poland
playing a significant role, contributing €75M in
revenues–outperforming the UK and France and securing the
second–highest spot in Europe.
Similarly, storage revenues saw a YoY decrease of
14.4%, driven by falling flash prices, a 13% decline in storage array
revenues, and a notable 16.5% reduction in Hyper converged
Infrastructure (HCI) revenues. Germany’s market size played a crucial
role in the overall decline, with a 15% YoY drop in revenues. Notably,
Poland stood out as one of the few European countries experiencing
sales growth, recording a 15% increase in Q4 2023.
2024 Outlook: Anticipating positive H2 trends in servers
Looking ahead to 2024, the forecast for H1
remains cautious for servers due to unfavourable YoY comparisons and
a fragile economic landscape. However, a more positive outlook is
expected in H2, with potential interest rate cuts supporting
datacenter investments. The overall economic situation will be the
key determinant, with optimistic scenarios hinging on falling
inflation and lower central bank interest rates, encouraging
businesses to invest in infrastructure.
Factors such as pricing, impacted by RAM and SSD
manufacturers’ Q4 2023 price increases, along with geopolitical events
like the Red Sea situation, may further influence the market. Despite
longer server refresh cycles, potential upgrades could bolster market
performance. However, businesses may choose to hold onto legacy
equipment until the impact of AI technology on server revenues becomes clearer.
In summary, the expected server revenue growth
for the full year ranges between –3.7% and 4.1%, with flat
performance at the midpoint.
Factors Driving Storage Market Growth in 2024
The outlook for enterprise storage is more
optimistic for 2024 with +4% YoY as a midrange performance, despite Q1
2024 which we anticipate will decline between –16.2% and –7.6% YoY.
Flash price increases from Q4 2023 are
anticipated to continue through H1 2024, positively impacting YoY
comparisons. The surge in generative AI usage is predicted to drive
increased demand for storage as data volumes escalate with the
proliferation of AI applications.
Businesses will need to enhance storage capacity
and performance to accommodate complex and data–hungry algorithms,
making robust, scalable, and high-performance storage infrastructure
essential. Additionally, demand for HCI may receive a boost from an
expected server refresh cycle if economic conditions improve and
budgets expand.
As the tech landscape continues to evolve,
businesses must remain agile, adapting to emerging trends and economic
shifts to stay ahead in the dynamic world of enterprise technology.
Stay tuned for more insights in the next
Forecast Fridays instalment! Request your copy
of the full report
here.
