The 10 Biggest Data Center Stories Of 2013

2013 was a year marked by changes in the data center industry that defied prior expectations.

The year was characterized by massive transformations at Hewlett-Packard and Dell, a fall in server and storage sales, a resurgence in the mainframe, a U.S. government spy scandal that threatened sales of equipment and services to foreign clients, and the realization that data center consolidation is trickier than once thought.

CRN looks back on 2013, a time when the simple promise of the economic recovery after the Great Recession gave way to a maddening bout of complexity.

Given the cost of building and running data centers, it makes sense to get rid of some of them.

The U.S. government has been trying to do so. The General Accounting Office in July reported that it closed 64 data centers since the beginning of the year and was on track to close 1,055 data centers by September 2014. However, by changing its definition of "data center" to include smaller operations not previously counted, the government reported it had about 3,700 more data centers than its prior estimates.

Analyst firm Gartner in December reported that businesses in general have too many data centers in too many countries, and it started recommending that its customers keep only two sites on each continent, unless required for disaster recovery or business continuity purposes.

The rebounding economy did not translate into improved data center hardware sales.

On the contrary, server revenue fell year-over-year by 7.7 percent in the first quarter of 2013, followed by a drop of 6.2 percent in the second quarter and 3.7 percent in the third quarter, according to IDC. Server shipments during that time fell 3.9 percent in the first quarter and 1.2 percent in the second quarter while remaining flat in the third quarter.

Storage sales fared even worse. IDC said first quarter 2013 revenue fell 0.9 percent over last year, followed by a drop of 0.8 percent in the second quarter and 3.5 percent in the third quarter. This was despite capacity growth of 26.4 percent in the first quarter, a number that fell to 21.5 percent in the second quarter and 16.1 percent in the third quarter.

While data center server sales in general stumbled in 2013, mainframe sales bucked the trend to show that big iron does indeed have a place, and a growing one at that, in the data center.

IBM in the first quarter of 2013 reported mainframe sales up 7 percent over those of the first quarter of 2013. Second quarter sales rose 10 percent over last year, while sales in the third quarter rose 6 percent.

IBM also showed it could continue its fast-paced mainframe development with its July introduction of the IBM zEnterprise BC12, or zBC12, the company's first mainframe to list for under $75,000.

At that price, the zBC12 can actually be lower in cost to operate than a distributed x86-based server infrastructure, IBM said.

When is a server a server? When someone says it is. The very definition of what a server is changed significantly in 2013. No longer merely computing devices with a processor, memory, storage, etc., in an enclosure that provide files or servers to other computers, servers now include:

-- Converged devices that, in addition to doing what a server does, also perform storage and networking operations. Examples include the Dell VRTX and the SimpliVity OmniCube.

* Cartridges, like the HP Moonshot modules based on Atom, ARM, and Opteron processors.

* Microservers, which take all sorts of liberties with server form factors.

* Servers built to the Open Compute Project specifications originally proposed by Facebook for servers that can be ordered by the container-load and tossed rather than repaired if there are any problems.

The server business may be changing and perhaps shrinking, but that seems to be more of an encouragement than a discouragement to vendors to enter the market. 2013 saw a number of entrants spring up from nowhere and enter the server market, including:

-- Lopoco, or Low Power Computer, Mountain View, Calif., which in July entered the market with a small line of traditional-looking servers characterized by low power consumption.

-- Servergy, a McKinney, Texas-based developer of energy-efficient servers based on Linux and the Power architecture from Freescale Semiconductor.

-- Best known for its hard drives and SSDs, Western Digital, though not a startup by any means, in October introduced the WD Sentinel DS5100 and WD Sentinel DS6100 servers with built-in network storage capabilities. The DS5100 and DS6100 feature Intel Xeon processors and the Windows Server 2012 R2 Essentials operating system.

Software-defined data centers have not yet become realities. But the idea of a software-defined data center took flight in 2013. Software-defined refers to the abstraction of the functionality of some traditional data center hardware component such as a networking switch or storage array into software, adding some type of orchestration and automation and making it available to applications via APIs -- either open source or proprietary -- to let those applications better control the functionality.

In 2013, nearly every storage and networking vendor either introduced, or said they did, software-defined technology or said their products are ready for it. Startups by the dozens also came to market with software-defined-focused technology.

What's left to be done? Getting everyone to agree on a definition and standards and then following through on those agreements. And that is much more difficult than pledging support for the technology.

IBM and Lenovo this spring held secret talks to discuss the possibility of Lenovo acquiring IBM's entry-level x86-based server business.

While IBM never confirmed such talks, Lenovo Chairman and CEO Yang Yuanqing (pictured) later that month said the China-based computer giant is in "preliminary negotiations with a third party in connection with a potential acquisition" related to a "certain computer server business."

The talks eventually fizzled out over how IBM's server assets should be priced, and IBM in a July financial call said a "substantial second-half gain" it was expecting, probably a reference to such a sale, was put on hold.

Should such a deal have occurred, Lenovo would have jumped into the ranks of the top data center providers with not only a full line of x86 servers but also a line that would have been ripe for combining with storage technology from a partnership it signed last year with EMC.

Revelations that the U.S. National Security Agency (NSA) spied on foreign citizens not only shook up international relations but also the 2013 data center infrastructure business for U.S.-based companies.

Concerns among foreign customers that data center hardware and cloud infrastructures from U.S. companies could have back doors through which the NSA could monitor overseas communications led to the Chinese-language China Economic Weekly this Summer to list eight U.S. IT companies, including Apple, Cisco, Google, IBM, Intel, Microsoft, Oracle and Qualcomm, as "guardian warriors who had infiltrated the Chinese market," according to the Brookings Institution.

Since then, IBM, Cisco and Microsoft have all reported weak sales in China.

Two years ago, when Hewlett-Packard CEO Meg Whitman took over the company after her two immediate predecessors Leo Apotheker and Mark Hurd were fired, the company seemed adrift. Whitman asked investors to be patient and promised to turn the company around over the space of several years.

She seems to be holding to her promises so far. HP's share prices are up about 90 percent over those of late 2012 thanks to rosier outlooks combined with cost-cutting measures and a renewed focus on the enterprise.

Can that rebound be sustained? Check here again next year.

Dell this Fall became a private company after a half-year of drama that pitted the company and Dell CEO Michael Dell against activist investor Carl Icahn, who wanted to see the company stay public after paying out substantial dividends.

Dell's move to go private was a recognition that its five-year plan to shift from a top provider of commodity products to become a provider of high-value solutions for enterprise data centers was not going to happen without massive changes that a public company could not have done due to Wall Street scrutiny.

For 2013, Dell is a top data center story because of the sheer size of the effort required to take it private. However, that was the easy part. Dell will also be in the top-10 data center stories of 2014, either as a resounding success story of corporate transformation or as a case study on how not to transform a company.