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Friday, May 01, 2020

Cloud IT Infrastructure Revenue will Reach $100.1 Billion

Total spending on IT infrastructure for cloud computing environments -- including public and private cloud -- recovered in the fourth quarter of 2019 (4Q19) after two consecutive quarters of decline, according to the latest worldwide market study by International Data Corporation (IDC).

The 12.4 percent year-over-year growth in 4Q19 yielded $19.4 billion in spending. The results also brought the full year into positive territory with annual growth of 2.1 percent and total spending of $66.8 billion for 2019.

Meanwhile, the overall IT infrastructure market results were mixed after a strong performance in 2018, up 3.3 percent to $38.1 billion in 4Q19 but declining 1.1 percent to $134.4 billion for the full year. In contrast, non-cloud IT infrastructure fell 4.6 percent to $18.7 billion for the quarter and declined 4.1 percent to $67.7 billion for the year.

Cloud IT Infrastructure Market Development

In 4Q19, growth in spending on cloud IT infrastructure was driven by the public cloud segment, which grew 14.5 percent year over year to $13.3 billion; private cloud grew 8.2 percent to $6.1 billion.

As the overall segment is generally trending up, it tends to be more volatile at the quarterly level as a significant part of the public cloud IT segment is represented by a few hyperscale service providers. After a weaker middle part of the year, public cloud ended 2019 barely up 0.1 percent to $45.2 billion. Private cloud grew in 2019 by 6.6 percent to $21.6 billion.

As investments in cloud IT infrastructure continue to increase, with some swings up and down in the quarterly intervals, the IT infrastructure industry is approaching the point where spending on cloud IT infrastructure consistently surpasses spending on non-cloud IT infrastructure.

The fourth quarter of 2019 marked the third consecutive quarter of cloud IT leadership with the annual share just slightly below the midpoint (49.7 percent). From here on out, IDC expects cloud IT infrastructure will stay above 50 percent of the IT Infrastructure market at both the quarterly and annual levels, reaching 60.5 percent annually in 2024.


Across the three IT infrastructure technology domains, storage platforms saw the fastest year-over-year growth in 4Q19 at 15.1 percent with spending reaching $6.6 billion. Compute platforms grew 14.5 percent year over year with $10.8 billion in spending while Ethernet switches declined 3.9 percent to $2 billion.

For the full year 2019, Ethernet switches led with year-over-year growth of 5 percent and $8.2 billion in spending, followed by storage platforms with 1.9 percent growth and spending of $23.1 billion, and compute platforms with growth of 1.5 percent and spending of $35.5 billion.

IDC's forecast for 2020, after taking into consideration the repercussions of the COVID-19 pandemic and its ensuing economic crisis, is for $69.2 billion in cloud IT infrastructure spending, a 3.6 percent predicted annual increase over 2019. Non-cloud IT infrastructure spending is expected to decline by 9.2 percent to $61.4 billion in 2020.

Together, overall IT infrastructure spending is expected to decline 2.9 percent to 130.6 billion.

"While the beginning of 2020 was marked by supply chain issues that should be resolved before the end of the second quarter, the negative economic impact will hit enterprise customers' CAPEX spending," said Kuba Stolarski, research director at IDC.

Outlook for Cloud IT Infrastructure Investment

IDC's new five-year forecast predicts cloud IT infrastructure spending will reach $100.1 billion in 2024 with a compound annual growth rate (CAGR) of 8.4 percent.

Non-cloud IT infrastructure spending will decline slightly to $65.3 billion with a -0.7 percent CAGR. Total IT infrastructure is forecast to grow at a 4.2 percent CAGR and produce $165.4 billion in spending in 2024.

The overall market outlook is subject to change, based upon macroeconomic shifts across the globe due to the pandemic. That said, there are cloud vendors and service providers that are better positioned to enable end-user organizations to achieve their digital transformation agenda. Therefore, new growth is unlikely to be evenly distributed across the IT infrastructure sector.