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Private Cloud Computing Deployment Growth will Surge

According to the latest worldwide market study by International Data Corporation (IDC), vendor revenue from sales of IT infrastructure products for cloud computing environments -- including public and private cloud -- grew 28 percent year-over-year in the fourth quarter of 2018 (4Q18), reaching $16.8 billion.

For 2018, annual spending on public and private cloud IT infrastructure totaled $66.1 billion, slightly higher (1.3 percent) than forecast in Q3 2018. IDC also raised its forecast for total spending on cloud IT infrastructure in 2019 to $70.1 billion – that's up 4.5 percent from last quarter's forecast – with year-over-year growth of 6 percent.

Cloud IT Infrastructure Market Development

That said, quarterly spending on public cloud IT infrastructure was down 6.9 percent in Q418 compared to the previous quarter but it still almost doubled in the past two years reaching $11.9 billion in 4Q18 and growing 33 percent year-over-year, while spending on private cloud infrastructure grew 19.6 percent reaching $5.75 billion.

Since 2013, when IDC started tracking IT infrastructure deployments in different environments, public cloud has represented the majority of spending on cloud IT infrastructure and in 2018 – as IDC expected – this share peaked at 69.6 percent with spending on public cloud infrastructure growing at an annual rate of 50.2 percent. Spending on private cloud grew 24.8 percent year-over-year in 2018.

In 4Q18, quarterly vendor revenues from IT infrastructure product sales into cloud environments fell and once again were lower than revenues from sales into traditional IT environments, accounting for 48.3 percent of the total worldwide IT infrastructure vendor revenues, up from 42.4 percent a year ago but down from 50.9 percent last quarter.

For the full year 2018, spending on cloud IT infrastructure remained just below the 50 percent mark at 48.4 percent. However, spending on all three technology segments in cloud IT environments is forecast to deliver slower growth in 2019 than in previous years.

Ethernet switches will be the fastest growing at 23.8 percent, while spending on storage platforms will grow 9.1 percent. Spending on compute platforms will stay at $35 billion but still slightly higher than expected in IDC's previous forecast.

The rate of annual growth for the traditional (non-cloud) IT infrastructure segment slowed down from 3Q18 to below 1 percent but the segment grew 11.1 percent quarter-over-quarter. For the full year, worldwide spending on traditional non-cloud IT infrastructure grew by 12.2 percent, exactly as forecast, as the market has started going through a technology refresh cycle, which will wind down by 2019.

By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 40.5 percent of total worldwide IT infrastructure spending -- that's down from 51.6 percent in 2018. Note, this share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

"The unprecedented growth of the infrastructure systems market in 2018 was shared across both cloud and non-cloud segments," said Kuba Stolarski, research director at IDC. With new on-premises public cloud stacks entering the picture, there is a distinct possibility of a significant surge in private cloud deployments over the next five years."

Outlook for Global Cloud IT Infrastructure Growth

All regions grew their cloud IT Infrastructure revenues by double digits in 4Q18. Revenue growth was the fastest in Canada at 67.2 percent year-over-year, with China growing at a rate of 54.4 percent.

Other regions among the fastest growing in 4Q18 included Western Europe (39.7 percent), Latin America (37.9 percent), Japan (34.9 percent), Central & Eastern Europe and Middle East & Africa (30.9 percent and 30.2 percent, respectively), Asia-Pacific excluding Japan (28.5 percent), and the United States (15.5 percent).

Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 10.9 percent, reaching $99.9 billion in 2023 and accounting for 59.5 percent of total IT infrastructure spend. Public cloud data centers will account for 68.3 percent of this amount, growing at a 10.4 percent CAGR. Spending on private cloud infrastructure will grow at a CAGR of 12 percent.

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