Bare Metal Cloud Market

The global bare metal cloud market size accounted for USD 8.5 Billion in 2023 and is estimated to achieve a market size of USD 19.1 Billion by 2028 growing at a CAGR of 17.4% from 2023 to 2028.

The emergence of bare metal cloud services represents a pivotal shift in cloud computing, driven by the evolving demands of businesses and organizations. Unlike traditional virtualized cloud instances, bare metal cloud services provide dedicated physical servers, offering a compelling solution for workloads requiring high performance, low latency, and uncompromising control. This evolution has been spurred by the rising adoption of data-intensive technologies such as AI, IoT, and big data analytics, which demand raw computing power. Bare metal cloud services have become an essential part of the cloud ecosystem, offering an alternative to traditional virtualized cloud instances for businesses with specific performance, security, and control requirements. The evolution of bare metal cloud services reflects the ongoing shift toward more specialized and customizable cloud infrastructure options.

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Recession Impact on the Bare Metal Cloud Market

The global recession caused by factors such as the Russia-Ukraine war, the pandemic, inflation, rising interest rates, and oil prices has reduced organizations’ spending on cloud services, which may impact the demand for bare metal cloud services in the short run. The ongoing recession, the Russia-Ukraine conflict, rising oil prices, and the global COVID-19 pandemic have significantly shaped the bare metal cloud market landscape. These events can influence numerous market aspects, including adoption rates, customer priorities, and vendor strategies. Recessions can drive companies to shift from capital expenditures (CapEx) to operational expenditures (OpEx) to manage costs better. Cloud services, including bare metal cloud, can align with this shift. In addition, the Russia-Ukraine war might impact the supply chains, including the availability of hardware components required for bare metal cloud infrastructure. This could affect the provisioning and expansion of bare metal cloud services.

Bare Metal Cloud Market Dynamics

Driver:  Need for high-performance computing to support resource-intensive applications

The surging demand for high-performance computing (HPC) is a driving force behind the rapid expansion of the market, with the adoption of applications such as complex simulations, scientific research, AI/ML model training, and real-time data analytics, demand substantial computational power, memory, and I/O throughput. According to a report by MarketsandMarkets, the global HPC market is projected to grow from USD 37.8 billion in 2020 to USD 49.4 billion by 2025, indicating the escalating need for computational power across industries. Furthermore, the emergence of edge computing, driven by the Internet of Things (IoT), intensifies the requirement for localized, high-performance data processing, pushing the edge computing market. The market is forecasted to grow substantially in response to these trends. High-performance computing is shaping the trajectory of the bare metal cloud market as organizations increasingly seek dedicated and robust hardware solutions to cater to resource-intensive workloads and capitalize on the performance advantages offered by bare metal cloud services.

Restraint: Stringent cloud regulations

The growth trajectory of the market is encountering hurdles due to the prevalence of stringent cloud regulations. While bare metal cloud solutions offer performance advantages, the complex data protection and compliance landscape hinders its wider adoption. In the financial sector, for instance, where regulatory requirements like the European Union’s MiFID II and the Dodd-Frank Act demand robust data controls, 69% of financial firms find it challenging to implement cloud solutions that align with these regulations, as reported by Druva’s 2021 Ransomware and Cloud Data Security Survey. Similarly, the healthcare industry faces obstacles; a survey by HIMSS found that 44% of healthcare IT professionals consider regulatory compliance a barrier to cloud adoption. These statistics depict the impact of stringent regulations on specific industries. As organizations struggle to navigate the intricate network of compliance regulations, the expansion of the bare metal cloud market could be restricted. This situation underscores the necessity for customized solutions that simultaneously cater to performance prerequisites and regulatory obligations.

Opportunity: Growing adoption of edge computing infrastructure for real-time data processing

Edge computing presents significant opportunities for adopting bare metal cloud solutions, revolutionizing how organizations process data at the network’s edge. As the Internet of Things (IoT) and real-time applications increase, the need for rapid data processing closer to data sources has become paramount. This is where edge computing comes into play, enabling quicker decision-making, reduced latency, and enhanced user experiences. Bare metal cloud, with its dedicated physical servers and high-performance characteristics, aligns seamlessly with the requirements of edge computing. By offering localized processing power without the virtualization overhead, the bare metal cloud supports the resource-intensive demands of edge applications, ensuring swift data analysis and responses. Industries such as manufacturing, retail, and healthcare, where immediate insights and actions are crucial, stand to benefit immensely from this synergy. The ability of the bare metal cloud to deliver unparalleled performance at the edge while maintaining the scalability and management advantages of cloud services positions it as a powerful enabler for the expanding landscape of edge computing applications.

Challenge: Lack of isolation in multi-tenant environments

The absence of effective isolation in multi-tenant environments poses a significant challenge in adopting bare metal cloud services. The risk of security breaches and unauthorized data access increases substantially in a bare metal cloud setup lacking proper isolation mechanisms. Moreover, the performance predictability of bare metal servers, a key driver for adoption, is compromised, as evidenced by an average 30% degradation in performance due to interference from co-located workloads as per the TechCloud Performance Report, 2020. As industries fight with stringent compliance mandates, the inadequacy of isolation exposes organizations to potential violations. This challenge underscores the pressing need for bare metal cloud providers to implement robust isolation measures that safeguard data, ensure consistent performance, and instill confidence among enterprises considering this technology for their mission-critical workloads.

The Bare Metal Cloud market Ecosystem

The SME segment is projected to witness the highest  CAGR during the forecast period based on organization size.

SMEs look forward to adopting the cloud and analytics to improve operations and become more efficient. SMEs often lack the resources for extensive in-house data centers and infrastructure management. Thus, small and medium-sized enterprises (SMEs) increasingly recognize the need for bare metal cloud solutions to address their unique IT requirements. These businesses often face resource-intensive workloads, stringent security demands, and cost constraints. The bare metal cloud offers SMEs dedicated physical servers, ensuring consistent performance without the virtualization overhead, making it ideal for mission-critical applications and data-sensitive tasks. Additionally, the flexibility to scale resources up or down as needed, combined with predictable pricing models, enables SMEs to optimize their IT budgets effectively. In a rapidly evolving digital landscape, the bare metal cloud empowers SMEs to compete effectively, ensuring high performance, reliability, and cost-efficiency for their IT operations.

By Vertical, the retail & consumer goods segment is expected to grow at the second-highest CAGR during the forecast period.

The retail and consumer goods industry is witnessing a substantial uptake of bare metal cloud technology, revolutionizing how businesses operate and serve their customers. Retail giants such as Amazon and Walmart have embraced bare metal cloud solutions to bolster their eCommerce platforms and streamline their supply chain operations. Amazon’s utilization of bare metal cloud servers has allowed them to efficiently handle the surges in web traffic during major sales events, ensuring uninterrupted shopping experiences for millions of customers. Moreover, the enhanced performance and security provided by the bare metal cloud help organizations safeguard customer data and enable personalized shopping experiences. As retailers continue to harness the power of data analytics and AI-driven applications, the bare metal cloud’s flexibility and scalability are essential in delivering the seamless and responsive services that modern consumers expect.

Based on Region, North America is expected to hold the largest market share during the forecast period.

The market in North America is experiencing robust growth driven by a convergence of factors. One key driver is the region’s insatiable appetite for high-performance computing (HPC) resources, as exemplified by research institutions and academic organizations necessitating robust infrastructure for scientific simulations and data analysis. In May 2023, Applied Digital Corporation, a company specializing in creating and managing advanced digital infrastructure tailored for (HPC) applications across North America, unveiled its new AI Cloud offerings. These services are designed to deliver high-performance computing capabilities for a wide range of AI applications, encompassing tasks such as extensive language model training and graphics rendering. Concurrently, the adoption of cutting-edge technologies such as AI and ML is accelerating, with North America accounting for a significant share of global AI software revenue. In addition, Government investments in hybrid and multi-cloud solutions in North America are on the rise, reflecting the public sector’s commitment to modernizing its IT infrastructure, enhancing services, and improving cost efficiency. The Canadian government has implemented a Cloud First policy, promoting the use of cloud solutions, including hybrid and multi-cloud, to enhance the delivery of digital services. This policy has led to investments in hybrid cloud architectures to meet the demands of various government departments. This is expected to drive the bare metal cloud market in the region.

Key Market Players

The bare metal cloud market is dominated by a few globally established players such as IBM (US), Oracle (US), AWS (US), Lumen (US), and Rackspace (US), among others, are the key vendors that secured bare metal cloud contracts in last few years. Driven by increased disposable incomes, easy access to knowledge, and fast adoption of technological products, buyers are more willing to experiment/test new things in the market.

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Scope of the Report

This research report categorizes the bare metal cloud market to forecast revenue and analyze trends in each of the following submarkets:

Based on Service Type:

• Compute Services
• Networking Services
• Database Services
• Security Services
• Storage Services
• Managed Services
• Other Service Type

Based on Organization Size:

• Large Enterprises
• SMEs

Based on Vertical:

• BFSI
• Retail & Consumer Goods
• IT & ITeS
• Telecommunications
• Healthcare & Life Sciences
• Manufacturing
• Media & Entertainment
• Government
• Other Verticals

Based on Region:

• North America
  • US
  • Canada
• Europe
  • UK
  • Germany
  • France
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • India
  • Rest of Asia Pacific
• Middle East & Africa
  • KSA
  • UAE
  • Rest of Middle East & Africa
• Latin America
  • Brazil
  • Mexico
  • Rest of Latin America

Recent Developments:

• In September 2023, New SmartNIC introduced enhancements to IBM Cloud Bare Metal Servers VPC. It integrated with a customer’s complete IBM Cloud Virtual Private Cloud (VPC) environment. It offered identical networking, storage, and Platform as a Service (PaaS) capabilities as IBM Cloud Virtual Servers within the VPC. Provisioning bare metal servers would be aligned with providing virtual servers, simplifying automation, and enhancing usability.
• In March 2022,  Oracle introduced 11 new computing services, including computing, networking, and storage services and capabilities that enable customers to run their workloads faster and more securely at lower costs. The OCI compute services include container instances, AMD E4, Dense Compute Instances, and Oracle Cloud VMware Solution on AMD. The OCI network services included Flexible Web Application Firewall, Web Application Acceleration, Network Visualizer, and vTAP, and storage services included Flexible Block Volumes with Performance-based Auto-tuning and High Availability ZFS.
• In November 2022, Amazon EC2 M6i and C6i bare metal instances were introduced, powered by 3rd-generation Intel Xeon Scalable processors (code-named Ice Lake). These instances were suitable for various types of workloads. M6i was designed for web and application servers, backend servers supporting enterprise applications, gaming servers, caching fleets, and application development environments. C6i instances are designed for compute-intensive applications like batch processing, distributed analytics, HPC, ad serving, highly scalable multiplayer gaming, and video encoding.
• In February 2021, Lumen partnered with VMware to interconnect the VMware Tanzu Basic edition with the Lumen Edge bare metal service, enabling businesses to create a secure software supply chain to rapidly deploy new edge-native workloads with resilient edge computing solutions to drive the next wave of digital innovation.

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