Cloud IT Infrastructure Spending Continued to Grow in Q1 2020 While Spending on Non-Cloud Environments Saw Double-Digit Declines, According to IDC

According to the International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker, vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, increased 2.2% in the first quarter of 2020 (1Q20) while investments in traditional, non-cloud, infrastructure plunged 16.3% year over year.

The broadening impact of the COVID-19 pandemic was the major factor driving infrastructure spending in the first quarter. Widespread lockdowns across the world and staged reopening of economies triggered increased demand for cloud-based consumer and business services driving additional demand for server, storage, and networking infrastructure utilized by cloud service provider datacenters. As a result, public cloud was the only deployment segment escaping year-over-year declines in 1Q20 reaching $10.1 billion in spend on IT infrastructure at 6.4% year-over-year growth. Spending on private cloud infrastructure declined 6.3% year over year in 1Q to $4.4 billion.

IDC expects that the pace set in the first quarter will continue through rest of the year as cloud adoption continues to get an additional boost driven by demand for more efficient and resilient infrastructure deployment. For the full year, investments in cloud IT infrastructure will surpass spending on non-cloud infrastructure and reach $69.5 billion or 54.2% of the overall IT infrastructure spend. Spending on private cloud infrastructure is expected to recover during the year and will compensate for the first quarter declines leading to 1.1% growth for the full year. Spending on public cloud infrastructure will grow 5.7% and will reach $47.7 billion representing 68.6% of the total cloud infrastructure spend.

Disparity in 2020 infrastructure spending dynamics for cloud and non-cloud environments will ripple through all three IT infrastructure domains – Ethernet switches, compute, and storage platforms. Within cloud deployment environments, compute platforms will remain the largest category of spending on cloud IT infrastructure at $36.2 billion while storage platforms will be fastest growing segment with spending increasing 8.1% to $24.9 billion. The Ethernet switch segment will grow at 3.7% year over year.

At the regional level, year-over-year changes in vendor revenues in the cloud IT Infrastructure segment varied significantly during 1Q20, ranging from 21% growth in China to a decline of 12.1% in Western Europe.

Notes:

a. IDC declares a statistical tie in the worldwide cloud IT infrastructure market when there is a difference of one percent or less in the vendor revenue shares among two or more vendors.

b. Due to the existing joint venture between HPE and the New H3C Group, IDC reports external market share on a global level for HPE as “HPE/New H3C Group” starting from Q2 2016 and going forward.

c. Due to the existing joint venture between IBM and Inspur, IDC reports external market share on a global level for Inspur and Inspur Power Systems as “Inspur/Inspur Power Systems” starting from 3Q 2018.

Long term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 9.6%, reaching $105.6 billion in 2024 and accounting for 62.8% of total IT infrastructure spend. Public cloud datacenters will account for 67.4% of this amount, growing at a 9.5% CAGR. Spending on private cloud infrastructure will grow at a CAGR of 9.8%. Spending on non-cloud IT infrastructure will rebound somewhat in 2020 but will continue declining with a five-year CAGR of -1.6%.

IDC’s Worldwide Quarterly Cloud IT Infrastructure Tracker is designed to provide clients with a better understanding of what portion of the server, disk storage systems, and networking hardware markets are being deployed in cloud environments. This tracker breaks out each vendors’ revenue by the hardware technology market into public and private cloud environments for historical data and provides a five-year forecast by the technology market. This Tracker is part of the Worldwide Quarterly Enterprise Infrastructure Tracker, which provides a holistic total addressable market view of the five key enabling infrastructure technologies for the datacenter (servers, external enterprise storage systems, purpose-built appliances: HCI and PBBA, and datacenter switches).

Taxonomy Notes

IDC defines cloud services more formally through a checklist of key attributes that an offering must manifest to end users of the service. Public cloud services are shared among unrelated enterprises and consumers; open to a largely unrestricted universe of potential users; and designed for a market, not a single enterprise. The public cloud market includes variety of services designed to extend or, in some cases, replace IT infrastructure deployed in corporate datacenters. It also includes content services delivered by a group of suppliers IDC calls Value Added Content Providers (VACP). Private cloud services are shared within a single enterprise or an extended enterprise with restrictions on access and level of resource dedication and defined/controlled by the enterprise (and beyond the control available in public cloud offerings); can be onsite or offsite; and can be managed by a third-party or in-house staff. In private cloud that is managed by in-house staff, “vendors (cloud service providers)” are equivalent to the IT departments/shared service departments within enterprises/groups. In this utilization model, where standardized services are jointly used within the enterprise/group, business departments, offices, and employees are the “service users.”

IDC defines Compute Platforms as compute intensive servers. Storage Platforms includes storage intensive servers as well as external storage and storage expansion (JBOD) systems. Storage intensive servers are defined based on high storage media density. Servers with low storage density are defined as compute intensive systems. Storage Platforms does not include internal storage media from compute intensive servers. There is no overlap in revenue between Compute Platforms and Storage Platforms, in contrast with IDC’s Server Tracker and Enterprise Storage Systems Tracker, which include overlaps in portions of revenue associated with server-based storage.

For more information about IDC’s Quarterly Cloud IT Infrastructure Tracker, please contact Lidice Fernandez at lfernandez@idc.com.