Have cloud hardware sales reached their zenith?

22nd October 2019, von in Industry News

Sales of hardware for cloud infrastructure declined by around 10% in Q2, according to IDC. This was, it noted, amid a wider slow -down in overall spending, but all the same, it begs the question of whether investment in public cloud systems is slowing down due to a slower pace of adoption.

IDC reported that vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switches) for cloud environments, including public and private cloud, declined 10.2% year over year in the second quarter of 2019, to a mere $14.1 billion.

The analyst lowered its forecast for total spending on cloud IT infrastructure for 2019 to $63.6 billion. If this is on the money, it will be a year-over-year decline of 2.1%.
Vendor revenue from hardware infrastructure sales to public cloud environments in 2Q19 was down 0.9% compared to the previous quarter (1Q19) and down 15.1% year over year to $9.4 billion. IDC said this was largely due to the change in demand from a handful of hyperscale service providers, whose spending on IT infrastructure tends to have visible up and downswings. It now expects an overall 6.7% decrease in this segment for 2019. It will still represent around two-thirds of the market though.

In contrast, spending on private cloud IT infrastructure showed more stable growth. In Q2, vendor revenues increased 1.5%, to $4.6 billion. IDC expects spending in this segment to grow 8.4% this year.

Overall, IDC said, the IT infrastructure industry is at a crossing point in terms of product sales to cloud vs. traditional IT environments. In 3Q18, vendor revenues from cloud IT environments climbed over the 50% mark for the first time. But they have since fallen below this level and are expected to be 49% for the whole of 2019.
Longer-term, however, IDC expects that spending on cloud IT infrastructure will grow steadily and will sustainably exceed the level of spending on traditional IT infrastructure in 2020 and beyond.

Spending on the three technology segments in cloud IT environments is forecast to deliver growth for Ethernet switches while compute platforms and storage platforms are expected to decline in 2019. Ethernet switches are expected to grow at 13.1%, while spending on storage platforms will decline at 6.8% and compute platforms will decline by 2.4%. Compute will remain the largest category of spending on cloud IT infrastructure at $33.8 billion.

For more, see https://www.idc.com/getdoc.jsp?containerId=prUS45552219

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