25 Sep 2019

FRAMINGHAM, Mass., September 25, 2019 – According to the International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker, vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, declined 10.2% year over year in the second quarter of 2019 (2Q19), reaching $14.1 billion. IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $63.6 billion, down 4.9% from last quarter's forecast and changing from expected growth to 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. This segment of the market continues to be highly impacted by demand from a handful of hyperscale service providers, whose spending on IT infrastructure tends to have visible up and down swings. After a strong performance in 2018, IDC expects the public cloud IT infrastructure segment to cool down in 2019 with spend dropping to $42.0 billion, a 6.7% decrease from 2018. Although it will continue to account for most of the spending on cloud IT environments, its share will decrease from 69.4% in 2018 to 66.1% in 2019. In contrast, spending on private cloud IT infrastructure has showed more stable growth since IDC started tracking sales of IT infrastructure products in various deployment environments. In the second quarter of 2019, vendor revenues from private cloud environments increased 1.5% year over year reaching $4.6 billion. IDC expects spending in this segment to grow 8.4% year over year in 2019.

Overall, the IT infrastructure industry is at 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 fell below this important tipping point since then. In 2Q19, cloud IT environments accounted for 48.4% of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50% mark at 49.0%. 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.

Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 6.6% from a year ago in Q219. For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.8%, as the technology refresh cycle driving market growth in 2018 is winding down this year. By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 41.8% of total worldwide IT infrastructure spending (down from 52.0% in 2018). This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

Most regions grew their cloud IT Infrastructure revenues in 2Q19. Middle East & Africa was fastest growing at 29.3% year over year, followed by Canada at 15.6% year-over-year growth. Other growing regions in 2Q19 included Central & Eastern Europe (6.5%), Japan (5.9%), and Western Europe (3.1%). Cloud IT Infrastructure revenues were down slightly year over year in Asia/Pacific (excluding Japan) (APeJ) by 7.7%, Latin America by 14.2%, China by 6.9%, and the USA by 16.3%.