According to IDC‘s 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% Y/Y in Q21 to $16.8 billion.
This decrease comes after 6 quarters of Y/Y 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% Y/Y 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 Y/Y 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. Analyst firm 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 2 years of declines. Shared cloud infrastructure is expected to grow by 11.1% Y/T 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, analysts track 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 MSPs. 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. It is expected that compute and storage spending by service providers to reach $74.6 billion for 2021, growing at 10.5% Y/Y.
At the regional level the Y/Y changes in spending on cloud infrastructure were mixed: spending increased across the AsiaPac 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 Y/Y 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.
Top Companies, WW Cloud Infrastructure Vendor Revenue, Market Share, and Y/Y Growth, 2Q21
(revenue in million)
IDC declares a statistical tie in the worldwide cloud IT infrastructure market when there is a difference of 1% or less in the vendor revenue shares among two or more vendors.
(a) Due to the existing joint venture between HPE and H3C, IDC is reporting external market share on a global level for HPE and H3C as HPE/H3C starting from 2Q16. Per the JV agreement, Tsinghua Holdings subsidiary, Unisplendour Corporation, through a wholly-owned affiliate, purchased a 51% stake in H3C and HPE has a 49% ownership stake in the new company.
(b) Inspur revenues include revenues and server units for Inspur Power Systems. Inspur is reported as a separate company with revenues including Inspur OEM systems and Inspur Power Systems locally developed and branded systems revenue. Per the JV agreement, Inspur Power Commercial System Co., Ltd., has total registered capital of RMB1 billion, with Inspur investing RMB510 million for a 51% equity stake, and IBM investing RMB 490 million for the remaining 49% equity stake.
(c) Lenovo/Lenovo NetApp Technologies revenues include revenues from the JV which is comprised by Lenovo with a 51% equity stake, and NetApp with the remaining 49% equity stake
Long term, it is expected that spending on compute and storage cloud infrastructure to have a 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 defines cloud services more formally through a checklist of key attributes that an offering must manifest to end users of the service. Shared cloud services are shared among unrelated enterprises and consumers; open to a largely unrestricted universe of potential users; and designed for a market, not a single enterprise. The shared cloud market includes a variety of services designed to extend or, in some cases, replace IT infrastructure deployed in corporate datacenters; these services in total are called public cloud services. The shared cloud market also includes digital services such as media/content distribution, sharing and search, social media, and e-commerce. Dedicated cloud services are shared within a single enterprise or an extended enterprise with restrictions on access and level of resource dedication and defined/controlled by the enterprise (and beyond the control available in public cloud offerings); can be onsite or offsite; and can be managed by a third-party or in-house staff. In dedicated cloud that is managed by in-house staff, “vendors (cloud service providers)” are equivalent to the IT departments/shared service departments within enterprises/groups. In this utilization model, where standardized services are jointly used within the enterprise/group, business departments, offices, and employees are the “service users.”