Cloud Sales Surpass Non-Cloud Infrastructure Spend for First Time

According to new analysis from the International Data Corporation (IDC), cloud environment sales surpassed sales for non-cloud infrastructure for the first time in Q2 2020. The move indicates organisations are continuing to accelerate their digital transformations and are embracing remote working for the long-term.

The IDC’s Worldwide Quarterly Cloud IT Infrastructure Tracker found that vendor revenue from IT infrastructure products (including servers, enterprise storage and Ethernet switch) for both public and private cloud increased by 34.4% year-on-year in Q2 2020. Meanwhile, non-cloud IT infrastructure declined by 8.7% in the same period.

The surge in cloud growth can be attributed to one major event in the past year: Covid-19. The global pandemic, as we’re all well aware, has necessitated a significant market response in order to maintain business, educational and societal activities during lockdown. IT infrastructure has powered this market response.

The IDC stated: “Across the world, there were massive shifts to online tools in all aspects of human life, including collaboration, virtual business events, entertainment, shopping, telemedicine, and education. Cloud environments, and particularly public cloud, were a key enabler of this shift.”

When it came to public cloud IT infrastructure, there was a staggering 47.8% increase in spending, taking overall spend to $14.1 billion. Spending on private cloud infrastructure also saw increases, with a 7% rise in spending year-on-year to Q2 2020 – taking spending total to $5 billion. On-premises private clouds accounted for 64.1% of the total private cloud infrastructure spend.

While it’s true that many organisations may have planned to undergo some degree of or further cloud adoption as part of their transformation initiatives, Covid-19 has up-ended business plans. For organisations, this new data from the IDC indicates a point-of-no-return.

Not only did the IDC look at the spending data from previous quarters, they forecasted what the future of cloud IT infrastructure market spend would look like.

“Long-term, IDC expects spending on cloud IT infrastructure to grow at a five-year compound annual growth rate (CAGR) of 10.4%, reaching $109.3 billion in 2024 and accounting for 63.6% of total IT infrastructure spend,” the IDC claimed. Of the cloud IT infrastructure spend, 69.4% will be on public cloud data centres, a proportion fuelled by a 10.9% CAGR. Private cloud infrastructure spend will grow at a lower, but still substantial, 9.3% CAGR.

The future isn’t as bright for non-cloud IT infrastructure, which is likely to see a market rebound in 2021 but further declines from 2022 to 2024. It will see an overall decline of -1.6% CAGR. (Nevertheless, that still leaves $40 billion worth of budget to play with in the non-cloud IT infrastructure business.)

The market has embraced cloud technology. We’ve reached a tipping point and there’s no going back. CIOs and CTOs must take this as a message to reinforce the pressure on adopting more cloud-based IT infrastructure to maintain competitiveness. If your organisation is already making the leap, then it’s time to reassess your strategies – can you be doing more to differentiate your employee experiences, processes, services and products to increase engagement and productivity?

To find out more about how the cloud is evolving, check out what our Innovators have to say.