Cloud Infrastructure spending decreased in Q2 of 2021, IDC

According to the International Data Corporation (IDC) Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment, spending on compute and storage infrastructure products for cloud infrastructure, including dedicated and shared environments, decreased 2.4% 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% 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. Investments in non-cloud infrastructure increased 3.4% year over year in 2Q21 to $13.4 billion recovering from a 7.2% decline in 2Q20.

Spending on shared cloud infrastructure reached $11.9 billion, a decrease of 6.1% compared to 2Q20, and a 17% 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% 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 continuously 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% year over year in 2Q21 to $4.9 billion with 46.5% 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% to $74.3 billion for 2021, while non-cloud infrastructure is expected to grow 2.7% to $58.9 billion after two years of declines. Shared cloud infrastructure is expected to grow by 11.1% year over year to $51.4 billion for the full year. Spending on dedicated cloud infrastructure is expected to grow 14.1% to $22.8 billion for the full year.

As part of the Tracker, IDC tracks various categories of service providers and how much compute and storage infrastructure these service providers purchase, including both cloud and non-cloud infrastructure. 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, down 1.9% from 2Q20 and up 13.6% from 1Q21. This spending accounted for 56.5% of 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% 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, and 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% while Western Europe recorded the strongest decline at 8.8%. For the full year, spending on cloud infrastructure is expected to increase across all regions compared to 2020.

At the company level, major vendors showed mixed results in their cloud infrastructure revenue in 2Q21, with Dell Technologies, HPE/H3C(a), and Lenovo/Lenovo NetApp Technologies(c) increasing sales while Inspur/Inspur Power Systems(b), and Huawei experiencing declines compared to 2Q20.

Long term, IDC expects spending on compute and storage cloud infrastructure to have a compound annual growth rate (CAGR) of 12.4% over the 2020-2025 forecast period, reaching $118.8 billion in 2025 and accounting for 67.3% of total compute and storage infrastructure spend. Shared cloud infrastructure will account for 69.9% of this amount, growing at a 12.4% CAGR. Spending on dedicated cloud infrastructure will grow at a CAGR of 12.3%. Spending on non-cloud infrastructure will rebound in 2021 but will flatten out at a CAGR of 0.1%, reaching $57.7 billion in 2025. Spending by service providers on compute and storage infrastructure is expected to grow at a 11.2% CAGR, reaching $115 billion in 2025.

IDC’s Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment is designed to provide clients with a better understanding of what portion of the compute and storage hardware markets are being deployed in cloud environments. The Tracker breaks out each vendors’ revenue into shared and dedicated cloud environments for historical data and provides a five-year forecast. This Tracker is part of the Worldwide Quarterly Enterprise Infrastructure Tracker, which provides a holistic total addressable market view of the four key enabling infrastructure technologies for the datacenter (servers, external enterprise storage systems, and purpose-built appliances: HCI and PBBA).