Non-Cloud Infrastructure Spending May Flatten Out by 2025: IDC

Enterprises have ramped up digital transformation efforts by allocating more capital toward the adoption of either shared or dedicated cloud. With the total cloud spending already hovering well over the spending on non-cloud infrastructure, IDC estimates that enterprise expenditure on just shared cloud infrastructure will soon bypass that of non-cloud infrastructure.

Enterprise spending on shared cloud compute and storage infrastructure may soon exceed that of non-cloud infrastructure, data from the International Data Corporation (IDC) suggests. According to the market intelligence firm’s findings from its quarterly trackerOpens a new window , spending jacked up in the first quarter of this year primarily due to increased reliance on shared cloud to ensure business continuity and manage risks.

IDC’s Infrastructure Tracker is a quarterly report that sheds light on the different technologies and use cases that are the most sought after in cloud, as well as other technologies. It comes only a few days after Gartner releasedOpens a new window its infrastructure-as-a-service estimates.

The firm’s latest tracker notes that organizations spent $10.3 billion on shared cloud infrastructure in Q1 2021, an 11.6% upsurge year-over-year. For the same time period, investments in non-cloud infrastructure increased 6.3% YoY to $13.5 billion.

Overall, the total enterprise spending on cloud infrastructure stands at $15.1 billion, a 12.5% rise. This accounts for roughly 54.0% of the total compute and storage infrastructure spending.

The COVID-19 pandemic has had a profound impact on businesses operations. The unprecedented nature of the global healthcare crisis meant governments had to enforce global lockdowns, which effectively crippled most. Even those ahead of the curve, and at the cusp of cloud-driven digital transformation barely managed to stay buoyant amidst the uncertainty. 

Consequently, organizations now seek to ensure that disruption shouldn’t dictate the functioning of the core business operations. So it seems they have ramped up respective digital transformation efforts by allocating more capital toward the adoption of cloud services.

See Also: 5 Ways To Stop Your Cloud Costs From Ballooning Beyond Your Control

Organizations Are Spending on Shared and Dedicated Cloud More than Non-Cloud Infrastructure

Short Term Estimates

The noteworthy thing about the rise is that it was fueled primarily by shared cloud infrastructure, wherein companies are increasingly adopting ‘as-a-service’ delivery models.

Compared to the $10.3 billion quarterly expenditure on shared cloud infra, organizations spent $4.8 billion on dedicated cloud infrastructure. However, the growth rate of the former (14.7%) is higher than the 11.6% of the former. This essentially means that while spending on dedicated infra may have not attained the heights of shared infra, it is up there as one of the highest.

These numbers suggest a flourishing industry as businesses bounce back from the lull observed during the past year and a half. This is why IDC expects cloud infrastructure expenditure to continue to grow throughout 2021 at a rate of 12.9%. As such, IDC estimates the cloud infra spending to touch $74.6 billion in this year.

Once again, shared cloud spending will continue to drive this growth. IDC anticipates a strong 12.2% rate of growth that’s likely to  contribute $51.8 billion in 2021. Dedicated cloud infra spending will also progress through 2021 at 14.7%, and contribute the remainder of $22.7 billion out of the total estimated $74.6 billion cloud expenditure.

On the other hand, IDC’s forecast for non-cloud infrastructure does not paint a very promising picture. The firm estimates that overall, non-cloud infrastructure spending will continue to grow to $58.5 billion, albeit at a significantly slower rate of 2.7%.

“IDC expects shared cloud infrastructure spending to surpass non-cloud infrastructure spending in the near future,” IDC said. “IDC expects that cloud environments will continue to outpace non-cloud throughout its forecast.”

Long Term Estimates

By 2025, cloud compute and storage expenditure will reach $112.9 billion with a CAGR of 11.3% between 2021-2025.

Of the $112.9 billion, IDC estimates that 67.5% will be spent on shared cloud infrastructure, while the remaining 32.5% on dedicated cloud infrastructure.

It certainly is a period of decline for non-cloud infra, spending on which will level off at $57.9 billion by 2025 (vs $58.5 billion expected in 2021), and barely growing at 0.3% CAGR.

Who Spent the Most on Cloud Infrastructure?

In Q1 2021, cloud service providers, digital service providers, communications service providers, and managed service providers collectively spent 12.5% higher YoY, amounting to $15.5 billion on cloud infrastructure. 

IDC also provided a breakdown of the revenue of companies providing cloud infrastructure. As evident from the table below, just over half of the cloud infrastructure market is served by eight companies. Four of the eight companies managed to attain double-digit growth, of which China-based Lenovo and Huawei performed the best.

Business with original design manufacturersOpens a new window (ODMs) also surged by a respectable 10.5%.

Dell Technologies hasn’t been able to capitalize on this spurt in cloud adoption, and achieved only 1.9% growth in revenue. Yet, the company still managed to retain its top position thanks to its solid existing market share.

With 40.3%, Canada registered the highest growth in cloud infra spend followed by China at 35%.

See Also: Amid Cutbacks in Cybersecurity Spending, Budgets Will Shift to IAM and Cloud: Expert Insights

Please note: Data for Western Europe and APAC except Japan and China (APeJC) is aggregated and not for individual countries.

Closing Thoughts

The breakout player among both IaaS and cloud infrastructure spaces is clearly Huawei, a victim of the US-China trade war which had to scale down its operations in electronic devices. Shenzhen-based Huawei managed to scale up its 2020 revenue for IaaS by 202.8%Opens a new window and its Q1 2021 cloud infra revenue by 37.9%.

Cloud infrastructure spending is driven by the burgeoning infrastructure-as-a-service (IaaS) industry dominated by AWS, Microsoft Azure, Google Cloud, Alibaba Cloud, and others. IaaS itself surged just over 40% in 2020, indicating the move to the shared cloud.

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