TECHNOLOGY

Revenue from Cloud IT infrastructure Products decline_Ehiabhi Femi

Vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, declined in the third quarter of 2019 (3Q19) as the overall IT infrastructure market continues to experience weakening sales following strong growth in 2018, IDC reveals.

The decline of 1.8% year over year was much softer than in 2Q19 as the overall spend on IT infrastructure for cloud environments reached $16.8 billion. IDC slightly increased its forecast for total cloud spending in 2019 to $65.4 billion, which represents flat performance compared to 2018.

The decline in cloud spending was driven by the public cloud segment, which was down 3.7% year over year, reaching $11.9 billion; sequentially from 2Q19, this represents a 24.4% increase.

As the overall segment is generally trending up, it tends to be more volatile quarterly as a significant part of the public cloud IT segment is represented by a few hyperscale service providers. This softness of the public cloud IT segment is aligned with IDC’s expectation of a slowdown in this segment in 2019 after a strong performance in 2018.

It is expected to reach $44 billion in sales for the full year 2019, a decline of 3.3% from 2018. Despite softness, public cloud continues to account for most of the spending on cloud IT environments.

However, as demand for the private cloud is increasing, the share of public cloud IT infrastructure continued to decline in 2019 and will be declining slightly throughout the forecast period.

Spending on cloud IT infrastructure surpasses non-cloud IT infrastructure

Spending on private cloud IT infrastructure has shown more stable growth since IDC started tracking sales of IT infrastructure products in various deployment environments.

In 3Q19, vendor revenues from private cloud environments increased 3.2% year over year, reaching nearly $5 billion. Spending in this segment is expected to grow 7.2% year over year in 2019 to $21.4 billion.

As cloud investments continue to increase, with some swings up and down in the quarterly intervals, the IT infrastructure industry is approaching the point where spending on cloud IT infrastructure consistently surpasses spending on non-cloud IT infrastructure.

Until 3Q19, it happened only once, in 3Q18, and in 3Q19 it crossed the 50% mark for the second time.

2020, the tipping point with spending on cloud IT infrastructure

In 3Q19, cloud environments accounted for 53.4% of vendor revenues. However, for the full year 2019, cloud spending is expected to stay just below the 50% mark at 49.8%. 2020 is expected to become the tipping point with spending on cloud IT infrastructure staying in the 50+% range.

Across the three IT infrastructure domains, Ethernet switches is the only segment expected to deliver visible year-over-year growth in 2019, up 11.2%, while spending on compute platforms will decline 3.1% and spending on storage will grow just 0.8%. Compute will remain the largest category of cloud IT infrastructure spending at $34.1 billion.

Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 7.7% from a year ago in 3Q19. For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.3%.

Keeping demand for traditional dedicated IT infrastructure afloat

By 2023, traditional non-cloud IT infrastructure is expected to only represent 41.9% of total worldwide IT infrastructure spending (down from 51.6% in 2018). This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

While the industry overall is moving toward greater use of cloud, there are certain types of workloads and business practices, and sometimes end user inertia, which keep demand for traditional dedicated IT infrastructure afloat.

Geographically, the cloud segment had a mixed performance in 3Q19. Declines in the U.S., Western Europe, and Latin America were driven by overall market weakness; in these and some other regions 3Q19 softness in cloud IT infrastructure spending was also affected by comparisons to a strong 3Q18.

In Asia/Pacific (excluding Japan), the second largest geography after the U.S., cloud spending increased 1.2% year over year, which is low for this region. However, it is in comparison with strong double-digit growth in 2018. Other growing regions in 3Q19 included Canada (4.9%), Central & Eastern Europe (4.6%), and Middle East & Africa (18.1%).

Infosec news ireland

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