Despite COVID-19, cloud data center spending heads towards higher growth in 2020: report

Despite COVID-19, cloud data center spending heads towards higher growth in 2020: report

Cloud spending is forecast for higher growth this year, but enterprise spending will be down due to the impact of COVID-19, according to a report.The top cloud service providers will resume their spending on servers in 2020 following a capex pause by some of them last year, according to Dell’Oro Group. All told, spending on servers will account for 47% of data center capex this year.

“Despite recent market uncertainties, we anticipate the Tier 1 Cloud service providers to increase data center capex as planned, primarily on servers, as the sector seeks to resume capacity expansion,” said Baron Fung, research director at Dell’Oro Group, in a statement. “We project a steep decline in enterprise IT spending due to severe near-term supply and demand disruptions from COVID-19.

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“Enterprises will seek to conserve capital during these uncertain times, and resort to the cloud to satisfy near-term demand for digital services. We expect that the cloud service providers will need to expand their infrastructure at a measured pace to capture this incremental demand.”

Dell’Oro Group’s report said that Amazon Web Services maintained a 50% cloud revenue share last year, but Microsoft Azure and Google Cloud Platform gained share. Despite the slowdown in spending, the top-10 cloud service providers spent a total of $66 billion last year, which was a 3% annual bump.

According to another report by Synergy Research Group (SRG), the worldwide spend on data center hardware and software reached $152 billion last year, which was a 2% increase over 2018.

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Spending on public cloud data center hardware and software grew by 7%, while spending on traditional data center and private cloud fell by 1%. Public cloud data centers now account for 37% of the total, with their share of spending having grown from 25% in 2015. Fourth quarter spending on all data center hardware and software was up 7% from Q3, “reflecting normal seasonal trends,” according to SRG.

SRG said servers accounted for 46% of the data center hardware and software spending last year. Vendor market share ranking in Q4 showed the leaders as Dell, Microsoft, HPE and Cisco followed by Huawei, IBM, VMware, Inspur and Lenovo, according to SRG.

“Cloud service revenues grew by 39% in 2019, enterprise SaaS revenues grew by 26%, search/social networking revenues grew by 20%, and e-commerce revenues grew by 24%, all of which helped to drive increases in spending on public cloud infrastructure,” said SRG’s John Dinsdale, a chief analyst, in a statement. “Meanwhile, enterprise spending on their own data centers is being crimped by the shift in workloads to public clouds. We are already seeing server shipments to public cloud providers outstripping shipments to enterprises and that trend will continue.”

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