Cloud IT Infrastructure Revenues Continue to Expand Despite Slow Down

Cloud IT Infrastructure Revenues Continue to Expand Despite Slow Down

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According to IDC, vendor revenue from sales of IT infrastructure products for cloud environments, including public and private cloud, grew 11.4% year over year in the first quarter of 2019 (1Q19), reaching $14.5 billion. IDC also lowered its forecast for total spending on cloud IT infrastructure in 2019 to $66.9 billion, down 4.5% from last quarter's forecast, with slower year-over-year growth of 1.6%.

Vendor revenue from sales to public cloud environments in 1Q19 was down 13.4% compared to the previous quarter but increased 8.9% year over year to $9.8 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 vendor revenue dropping to $44.5 billion, a 2.2% decrease from 2018.

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 first quarter of 2019, vendor revenues from private cloud environments increased 16.9% year over year reaching $4.7 billion. IDC expects spending in this segment to grow 10.1% year over year in 2019.

Overall, the IT infrastructure industry is at a crossroads 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 has since fallen below this important threshold. In 1Q19, cloud IT environments accounted for 48.8% of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50% mark at 49.4%. Over the long-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 and storage platforms while compute platforms are expected to decline in 2019. Ethernet switches will be the fastest growing at 20.9%, while spending on storage platforms will grow slightly at 1.9%. Meanwhile, compute platforms will decline by 2.8% in 2019 but will remain the largest category of spending on cloud IT infrastructure at $34.2 billion.

Sales of IT infrastructure products into traditional IT environments remained flat compared to 1Q18. For the full year 2019, spending on traditional non-cloud infrastructure is expected to decline by 3.5%, as the technology refresh cycle that drove market growth in 2018 is winding down. By 2023, IDC expects that traditional non-cloud infrastructure will only represent 42.4% of total spending (down from 51.9% in 2018). This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

Top Companies, Worldwide Cloud IT Infrastructure, Q1 2019 (Revenues are in Millions)

Company

1Q19 Revenue

1Q19 Share

1Q18 Revenue

1Q18 Share

1Q19/1Q18 Growth

1. Dell

$2,584

17.8%

$2,147

16.5%

20.4%

2. HPE

$1,747

12.0%

$1,444

11.1%

21.0%

3. Cisco

$1,040

7.2%

$928

7.1%

12.0%

4. Lenovo

$674

4.6%

$456

3.5%

47.7%

4. Inspur

$641

4.4%

$552

4.2%

16.2%

ODM Direct

$4,460

30.7%

$4,512

34.6%

-1.1%

Others

$3,378

23.3%

$2,996

23.0%

12.7%

Total

$14,524

100.0%

$13,034

100.0%

11.4%

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