Synergy Research Group’s detailed review of enterprise IT spending over the last ten years shows that annual spending on cloud infrastructure services has gone from virtually zero to almost $100 billion. Meanwhile enterprise spending on data center hardware and software has been stagnant through much of the decade. Data center spending did jump in 2018 even though server unit shipments remained flat, thanks to more richly configured and higher-priced servers.
Despite that 2018 increase in data center spending, growth in cloud spending did not miss a beat in 2018 and then grew again by almost 40% in 2019. Over the whole decade, average annual spending growth for data center was 4% (mostly due to the first three years) and for cloud services was 56%. 2019 will mark the first time that enterprises spend more on cloud services (IaaS, PaaS and hosted private cloud) than they do on data center equipment.
Based on actual spending in Q1-Q3 and its forecast for Q4, Synergy projects that 2019 worldwide spending on data center hardware and software (comprising servers, storage, networking, security and associated software) will be over $93 billion. The major segments with the highest growth rates over the decade were virtualization software, Ethernet switches and network security. Server share of the total data center market remained steady while storage share declined. Synergy projects that 2019 worldwide spending on cloud infrastructure services will reach $97 billion. The major segments with the highest growth rates over the decade were mainly within PaaS – especially database, IoT and analytics. IaaS share of the total held reasonably steady while managed private cloud service share declined somewhat.
“The decade has seen a dramatic increase in computer capabilities, increasingly sophisticated enterprise applications and an explosion in the amount of data being generated and processed, pointing to an ever-growing need for data center capacity. However, over half of the servers now being sold are going into cloud providers’ data centers and not those of enterprises,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “Over the last ten years we have seen a remarkable transformation in the IT market. Enterprises are now spending almost $200 billion per year on buying or accessing data center facilities, but cloud providers have become the main beneficiaries of that spending.”
