Skip to main content

Cloud IT Infrastructure Demand Continues to Fluctuate

Demand for computer servers, disk storage systems, and networking hardware deployed within an enterprise hybrid cloud environment remains strong. Moreover, the investment in non-cloud on-premises infrastructure seems assured by the CIO and CTO need to deliver superior security and compliance with IT regulatory requirements in several key industries.

According to the latest worldwide market study by International Data Corporation (IDC), vendor revenue from sales of IT infrastructure products for cloud environments -- including public and private cloud -- declined 10.2 percent year-over-year in the second quarter of 2019 (2Q19), reaching $14.1 billion.

Cloud IT Infrastructure Market Development

IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $63.6 billion, down 4.9 percent from last quarter's forecast and changing from expected growth to a year-over-year decline of 2.1 percent.

Vendor revenue from hardware infrastructure sales to public cloud environments in 2Q19 was down 0.9 percent compared to the previous quarter (1Q19) and down 15.1 percent year over year to $9.4 billion.

This segment of the market continues to be highly impacted by demand from a handful of hyperscale cloud service providers, whose spending on IT infrastructure tends to have significant upward and downward swings. That ongoing fluctuation creates volatility for the IT infrastructure vendors.

After a strong performance in 2018, IDC expects the public cloud IT infrastructure segment to cool down in 2019 with spending reaching $42 billion -- that's a 6.7 percent decrease from 2018. Although it will continue to account for most of the spending on cloud IT environments, its share will decrease from 69.4 percent in 2018 to 66.1 percent in 2019.

In contrast, spending on private cloud IT infrastructure has shown more stable growth since IDC started tracking sales of IT infrastructure products in various deployment environments. In the second quarter of 2019, vendor revenues from private cloud environments increased 1.5 percent year-over-year reaching $4.6 billion. IDC expects spending in this segment to grow 8.4 percent year-over-year in 2019.


Overall, the IT infrastructure industry is at crossroads in terms of product sales to cloud vs. traditional IT environments. In 3Q18, vendor revenues from cloud IT environments climbed over the 50 percent mark for the first time but fell below this important tipping point since then.

In 2Q19, cloud IT environments accounted for 48.4 percent of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50 percent mark at 49 percent.

Longer-term, however, IDC expects that spending on cloud IT infrastructure will grow steadily and will sustainably exceed the level of spending on traditional IT infrastructure in 2020 and beyond.

Spending on the three technology segments in cloud IT environments is forecast to deliver growth for Ethernet switches while computing platforms and storage platforms are expected to decline in 2019.

Ethernet switches are expected to grow at 13.1 percent, while spending on storage platforms will decline at 6.8 percent and compute platforms will decline by 2.4 percent. Compute will remain the largest category of spending on cloud IT infrastructure at $33.8 billion.

Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 6.6 percent from a year ago in Q219. For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.8 percent, as the technology refresh cycle driving market growth in 2018 is winding down this year.

By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 41.8 percent of total worldwide IT infrastructure spending -- that's down from 52 percent in 2018. This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

Most regions grew their cloud IT Infrastructure revenues in 2Q19. Middle East & Africa was fastest growing at 29.3 percent year-over-year, followed by Canada at 15.6 percent year-over-year growth. Other growing regions in 2Q19 included Central & Eastern Europe (6.5 percent), Japan (5.9 percent), and Western Europe (3.1 percent).

Cloud IT Infrastructure revenues were down slightly year-over-year in Asia-Pacific (excluding Japan) (APeJ) by 7.7 percent, Latin America by 14.2 percent, China by 6.9 percent, and the USA by 16.3 percent.

Outlook for Cloud IT Infrastructure Investment

Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 6.9 percent, reaching $90.9 billion in 2023 and accounting for 58.2 percent of total IT infrastructure spend.

Public cloud data centers will account for 66 percent of this amount, growing at a 5.9 percent CAGR. Spending on private cloud infrastructure will grow at a CAGR of 9.2 percent.

Popular posts from this blog

Virtual Reality Market Set to Reach $100 Billion

Virtual Reality (VR) market growth is now finally coming to fruition. Thanks to current actions and market momentum, VR is approaching what can be considered critical mass. And, not a moment too soon. This growth momentum comes from new hardware and content releases, accelerating enterprise value recognition, and a significant metaverse wild card that could potentially lift adoption and usage. According to the latest worldwide market study by ABI Research, over 85 million VR Head Mounted Displays (HMDs) will be shipped in 2027 across consumer and enterprise segments, creating a $100 billion VR market that includes hardware, software, and services. Virtual Reality Market Development "Expectations have been high in VR for years, and even decades, without notable growth to show. That growth is finally coming over the next five years," said Eric Abbruzzese, research director at ABI Research . The barrier to entry is lower than ever, all while content performance and user experien

Human Resource Transformation Enabled by IT

Many senior executives are taking a proactive approach to digital business transformation in order to achieve their strategic goals. Delivering revenue growth and profitability is now imperative for every function, including Human Resources (HR). The top 3 priority HR technologies this year are skills management, learning experience platforms, and internal talent marketplaces, according to the latest worldwide market study by Gartner. "With a tumultuous global economy, HR technology leaders face a balancing act in 2023," said Sam Grinter, director at Gartner . "Leaders must anticipate greater levels of accountability and demand for measurable outcomes to justify new technology investments." HR Transformation Market Development Forty-four percent of HR leaders report driving better business outcomes is their number one strategic priority for HR technology transformation over the next three years. Growth in headcount and skills (26 percent) and cost optimization (17 p

How Savvy Pioneers Lead the Future of Work

Hybrid and fully remote work are inevitable in the Global Networked Economy where high-performance talent demands flexibility from employers. To enable these progressive work models, organizations are investing in a wide range of technologies to support more agile types of employment.  According to the latest worldwide market study by International Data Corporation (IDC), leading organizations will spend nearly $1 billion on the Future of Work (FoW) in 2023 -- that's an increase of 18.8 percent over 2022. Future of Work Market Development "Work models continue to evolve, but 37 percent of decision-makers in a recent global survey note that Remote and Hybrid work models will be an embedded part of accepted work practices, supported by a continued shift to the cloud, increasingly instrumented and interconnected physical workplaces, and intelligent digital workspaces," said Holly Muscolino, group vice president at IDC . According to the IDC assessment, organizations must mak