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Cloud Infrastructure Spend will Reach $118.8 Billion

According to the latest worldwide market study by International Data Corporation (IDC), spending on compute and storage products for cloud computing infrastructure -- including dedicated and shared environments -- decreased 2.4 percent year-over-year in the second quarter of 2021 (2Q21) to $16.8 billion.

This decrease comes after six quarters of year-over-year growth, and most notably compares to the 39.1 percent annual growth seen by the market in 2Q20, when the world just entered the pandemic with the first wave of business and country closures causing a spike in investments in cloud services and infrastructure.

In contrast, investments in non-cloud infrastructure increased 3.4 percent year-over-year in 2Q21 to $13.4 billion recovering from a 7.2 percent decline in 2Q20. Proving, once again, that the demand for Hybrid IT infrastructure continues to fluctuate from quarter to quarter and year to year.

Cloud Computing Infrastructure Market Development

Spending on shared cloud infrastructure reached $11.9 billion, a decrease of 6.1 percent compared to 2Q20, and a 17 percent increase from 1Q21.

Weakness in year-over-year demand from public cloud service providers comes after an exceptionally strong 2Q20, in which spending increased 55.5 percent driven by the spike in demand for cloud services in the first months of the pandemic.

Such discrepancy in growth rates attributable to exceptional events creates "hard" comparisons that don't reflect long-term trends. IDC expects to see continued strong demand for shared cloud infrastructure with shared cloud infrastructure spending surpassing non-cloud infrastructure spending by 2022.

Spending on dedicated cloud infrastructure increased 7.8 percent year-over-year in 2Q21 to $4.9 billion with 46.5 percent of this amount deployed on customer premises. IDC expects that cloud environments will continue to outpace non-cloud throughout its forecast.

Despite weakness in 2Q21, IDC is forecasting cloud infrastructure spending to grow 12 percent to $74.3 billion for 2021, while non-cloud infrastructure is expected to grow 2.7 percent to $58.9 billion after two years of declines.


Shared cloud infrastructure is expected to grow by 11.1 percent year-over-year to $51.4 billion for the full year. Spending on dedicated cloud infrastructure is expected to grow 14.1 percent to $22.8 billion for the full year.

IDC tracks various categories of service providers and how much compute and storage infrastructure they deploy. The service provider category includes cloud service providers, digital service providers, communications service providers, and managed service providers.

In 2Q21, service providers as a group spent $17.1 billion on compute and storage infrastructure -- that's down 1.9 percent from 2Q20 and up 13.6 percent from 1Q21. This spending accounted for 56.5 percent of the total compute and storage infrastructure market. IDC expects compute and storage spending by service providers to reach $74.6 billion for 2021 -- growing at 10.5 percent year-over-year.

At the regional level, the year-over-year changes in spending on cloud infrastructure were mixed: spending increased across the Asia-Pacific subregions, in Latin America, Canada, and Central and Eastern Europe, but spending declined in the United States, Western Europe, and the Middle East and Africa.

Canada showed the strongest year-over-year increase in cloud infrastructure spending in 2Q21 at 25.6 percent while Western Europe recorded the strongest decline at 8.8 percent. For the full year, spending on cloud infrastructure is expected to increase across all regions compared to 2020.

Outlook for Cloud Computing Infrastructure Growth

Long term, IDC expects spending on compute and storage cloud infrastructure to have a compound annual growth rate (CAGR) of 12.4 percent over the 2020-2025 forecast period, reaching $118.8 billion in 2025 and accounting for 67.3 percent of total compute and storage infrastructure spend.

Shared cloud infrastructure will account for 69.9 percent of this amount, growing at a 12.4 percent CAGR. Spending on dedicated cloud infrastructure will grow at a CAGR of 12.3 percent.

Spending on non-cloud infrastructure will rebound in 2021 but will flatten out at a CAGR of 0.1 percent, reaching $57.7 billion in 2025. Spending by service providers on compute and storage infrastructure is expected to grow at an 11.2 percent CAGR, reaching $115 billion in 2025.

That said, I believe the established hyperscaler's public cloud computing infrastructure offerings are commodity services with very little perceived differentiation, from a CIO or CTO perspective. That's why the diverse enterprise multi-cloud environment has evolved so rapidly within developed markets.

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