Vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, increased 9.4% year over year in the third quarter of 2020 (3Q20), according to IDC.
Investments in traditional, non-cloud, IT infrastructure declined -8.3% year over year in 3Q20.
These growth rates show the market response to major adjustments in business, educational, and societal activities caused by the COVID-19 pandemic and the role IT infrastructure plays in these adjustments.
Massive shifts to online tools worldwide
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.
Spending on public cloud IT infrastructure increased 13.1% year over year in 3Q20, reaching $13.3 billion. During the previous quarter spending on public cloud IT infrastructure exceeded non-cloud IT infrastructure spending for the first time ever, but non-cloud IT infrastructure spending was back on top in 3Q20 at $13.7 billion.
Public cloud IT infrastructure spending is expected to surpass non-cloud IT infrastructure spending again in the near future and expand its lead going forward. Spending on private cloud infrastructure increased 0.6% year over year in 3Q20 to $5 billion with on-premises private clouds accounting for 63.2% of this amount.
Hardware infrastructure market reaching a tipping point
The hardware infrastructure market is believed to have reached a tipping point and cloud environments will continue to account for an increasingly greater share of overall spending.
With only one quarter remaining and the market stabilizing after the initial COVID-19 market shock, the forecast has been slightly increased for cloud IT infrastructure spending for the full year 2020, expecting 11.1% growth to $74.1 billion. The forecast for non-cloud infrastructure has been reduced, expecting a decline of -11.4% to $60.2 billion.
Public cloud IT infrastructure is expected to grow by 16.7% year over year to $52.7 billion for the full year. Spending on private cloud infrastructure is expected to decline -0.5% to $21.3 billion for the full year.
Dominance of cloud IT environments over non-cloud
As of 2019, the dominance of cloud IT environments over non-cloud already existed for compute platforms and Ethernet switches while the majority of newly shipped storage platforms were still residing in non-cloud environments.
Starting in 2020, with increased investments from public cloud providers on storage platforms, this shift will remain persistent across all three technology domains.
Within cloud deployment environments in 2020, compute platforms will remain the largest segment (49.1%) of spending, growing at 2.3% to $36.4 billion while storage platforms will be the fastest growing segment with spending increasing 27.4% to $29.2 billion, and the Ethernet switch segment will grow 4.0% year over year to $8.5 billion.
Spending by region
Spending on cloud IT infrastructure increased across most regions in 3Q20, with the highest annual growth rates in Canada (32.8%), China (29.4%), and Latin America (23.4%). Growth in the United States was 4.7%.
Japan and Western Europe declined by -6.7% and -3.4%, respectively. In all regions except Canada and Japan, growth in public cloud infrastructure exceeded growth in private cloud IT.
At the vendor level, the results were mixed. Inspur, Huawei, and Lenovo had double-digit year-over-year growth while most other major vendors, including the ODM Direct group of vendors, had single-digit growth. Cisco was the only major vendor with a year-over-year decline.