FRAMINGHAM, IDC – Total end-user spending on IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, recovered in the fourth quarter after two consecutive quarters of decline, says International Data Corp. Year-over-year growth of 12.4% yielded $19.4 billion in spending.

The fourth quarter results also brought the full year into positive territory, with annual growth of 2.1% and total spending of $66.8 billion for 2019. Meanwhile, the overall IT infrastructure market continued to struggle after its strong performance in 2018, up 3.3% to $38.1 billion in the fourth quarter but declining 1.1% to $134.4 billion for 2019. Non-cloud IT infrastructure fell 4.6% to $18.7 billion for the quarter and declined 4.1% to $67.7 billion for the year.

In the fourth quarter, growth in spending on cloud IT infrastructure was driven by the public cloud segment, which grew 14.5% year-over-year to $13.3 billion; private cloud grew 8.2% to $6.1 billion. As the overall segment is generally trending up, it tends to be more volatile at the quarterly level, as a significant part of the public cloud IT segment is represented by a few hyperscale service providers, says IDC. After a weaker middle part of the year, public cloud ended 2019 barely up 0.1% to $45.2 billion. Private cloud grew in 2019 6.6% to $21.6 billion.

As investments in cloud IT infrastructure 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. The fourth quarter of 2019 marked the third consecutive quarter of cloud IT leadership, with the annual share slightly below the midpoint (49.7%). From here on out, IDC expects cloud IT infrastructure will stay above 50% of the IT Infrastructure market at both the quarterly and annual levels, reaching 60.5% annually in 2024.

Across the three IT infrastructure technology domains, storage platforms saw the fastest year-over-year growth in the fourth quarter at 15.1%, with spending reaching $6.6 billion. Compute platforms grew 14.5% year-over-year, with $10.8 billion in spending, while Ethernet switches declined 3.9% to $2 billion. For 2019, Ethernet switches led with year-over-year growth of 5% and $8.2 billion in spending, followed by storage platforms, with 1.9% growth and spending of $23.1 billion, and compute platforms with growth of 1.5% and spending of $35.5 billion.

IDC's forecast for 2020, after taking into consideration the repercussions of the Covid-19 pandemic and its ensuing economic crisis, is for $69.2 billion in cloud IT infrastructure spending, a 3.6% predicted annual increase over 2019. Non-cloud IT infrastructure spending is expected to decline 9.2% to $61.4 billion in 2020. Together, overall IT infrastructure spending is expected to decline 2.9% to 130.6 billion.

The Covid-19 pandemic represents a severe threat to global growth. Prior to the outbreak, the expected global real GDP growth was to be 2.3% (at market exchange rates) in 2020. The emergence of the epidemic in China is a game-changer, and an expected decline for 2020 is now 0.2%, the slowest rate since the global financial crisis. The negative effect on growth will come via both demand and supply channels. On one hand, quarantine measures, illness, and negative consumer and business sentiment will suppress demand in specific areas, while certain pockets of demand will surface, such as cloud platforms for communication and collaboration workloads. At the same time, closure of some factories and disruption to supply chains will create supply bottlenecks. IDC expects these effects to be distributed unevenly across the market landscape.

"While the beginning of 2020 was marked by supply chain issues that should be resolved before the end of the second quarter, the negative economic impact will hit enterprise customers' CAPEX spending," said Kuba Stolarski, research director, Infrastructure Systems, Platforms and Technologies at IDC. "As enterprise IT budgets tighten through the year, public cloud will see an increase in demand for services. This increase will come in part from the surge of work-from-home employees using online collaboration tools, but also from workload migration to public cloud as enterprises seek ways to save money for the current year. Once the coast is clear of coronavirus, IDC expects some of this new cloud service demand to remain sticky going forward."

IDC's new five-year forecast predicts cloud IT infrastructure spending will reach $100.1 billion in 2024, with a CAGR of 8.4%. Non-cloud IT infrastructure spending will decline slightly to $65.3 billion, with a -0.7% CAGR. Total IT infrastructure is forecast to grow at a 4.2% CAGR and produce $165.4 billion in spending in 2024.

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