IDC Forecasts Strong Growth for Global Cloud-Based Services Market

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With the COVID-19 pandemic and more employees working offsite, the use of cloud technology to enable employees to access data and documents outside of the office continues to increase. The International Data Corporation (IDC) recently reported global spending on this market for the third quarter, and is forecasting strong growth for it in the future.

According to the IDC Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment, spending on compute and storage infrastructure products for cloud infrastructure, including dedicated and shared environments, increased 6.6 percent year-over-year in the third quarter of 2021 (3Q21) to $18.6 billion.

This increase resumes the trend of net positive year-over-year spending growth per quarter, which saw a pause in the second quarter of 2021 when spend decreased 1.9 percent. However, that followed seven quarters of year-over-year spending growth that started in 3Q19, highlighted by 38.4 percent growth in 2Q20 as the first global pandemic wave led to business and country closures, causing a spike in investments in cloud services and infrastructure. Investments in non-cloud infrastructure increased 7.3 percent year-over-year in 3Q21 to $14.6 billion, the third consecutive quarter to see an increase in year-over-year spending after a period of declining spending that started in 2Q19.

Shared Cloud Infrastructure

Shared cloud services are shared among unrelated enterprises and consumers; are open to a largely unrestricted universe of potential users; and designed for a market, not a single enterprise. The shared cloud market includes a variety of services designed to extend or, in some cases, replace IT infrastructure deployed in corporate datacenters; these services in total are called public cloud services. The shared cloud market also includes digital services such as media/content distribution, sharing and search, social media, and e-commerce.

Spending on shared cloud infrastructure reached $13 billion, an 8.6 percent year-over-year increase, and a 6.6 percent increase from the preceding (second) quarter. This continues a trend of year-over-year growth since 4Q19, interrupted in the previous quarter (2Q21) by comparison to an exceptionally strong 2Q20 that saw spending increase 55.1 percent year-over-year, driven by the spike in demand for public cloud services in the first months of the pandemic.

IDC expects to see continuously strong demand for shared cloud infrastructure with spending surpassing non-cloud infrastructure spending in 2022.

Dedicated Cloud Services

Dedicated cloud services are shared within a single enterprise or an extended enterprise, with restrictions on access and level of resource dedication and defined/controlled by the enterprise (and beyond the control available in public cloud offerings).

Spending on dedicated cloud infrastructure increased 13.4 percent year-over-year in 3Q21 to $5.6 billion, the highest year-over-year increase since 1Q19, with 45.5 percent of this amount deployed on customer premises. IDC expects that spending on cloud environments will continue to outpace non-cloud spending throughout its forecast.

Full-Year Forecast

For the full year 2021, IDC forecasts cloud infrastructure spending to grow 8.3 percent year-over-year to to $71.8 billion, while non-cloud infrastructure is expected to grow 1.9 percent to $58.4 billion after two years of declines. Shared cloud infrastructure is expected to grow by 7.2 percent year-over-year to $49.7 billion for the full year. Spending on dedicated cloud infrastructure is expected to grow 10.7 percent to $22.2 billion for the full year.

Service Providers

As part of the Tracker, IDC tracks various categories of service providers and how much compute and storage infrastructure these service providers purchase, including both cloud and non-cloud infrastructure. The service provider category includes cloud service providers, digital service providers, communications service providers, and managed service providers. In 3Q21, service providers as a group spent $18.9 billion on compute and storage infrastructure, up 10.2 percent year-over-year, and up 6.7 percent from 2Q21. This spending accounted for 57.1 percent  of the total compute and storage infrastructure market. IDC expects compute and storage spending by service providers to reach $72.6 billion for 2021, growing 7.4 percent year-over-year.

Spending by Region

At the regional level, year-over-year spending on cloud infrastructure increased with the level of growth varying across regions. The Asia/Pacific sub-regions, Canada, and the Europe sub-regions saw double-digit growth in spending, while Latin America, the Middle East and Africa, and the United States saw more moderate single-digit increases in spending.

The Asia/Pacific region (excluding Japan and China) showed the strongest year-over-year increase in cloud infrastructure spending in 3Q21 at 64.3 percent year-over-year, while the U.S. recorded the weakest growth at 1.1 percent.

For the full year, IDC forecasts that spending on cloud infrastructure will increase across all regions compared to 2020, particularly in Asia/Pacific regions (excluding Japan), Canada, and Central and Eastern Europe. The United States is expected to show only marginal year-over-year growth of 0.4 percent.

Long-Term Forecast

Long-term, IDC expects spending on compute and storage cloud infrastructure to have a compound annual growth rate (CAGR) of 12.4 percent over the 2020-2025 forecast period, reaching $118.8 billion in 2025 and accounting for 67.0 percent of total compute and storage infrastructure spend.

Shared cloud infrastructure will account for 70.9 percent of this amount, growing at a 12.7 percent CAGR. Spending on dedicated cloud infrastructure will grow at a CAGR of 11.5 percent. Spending on non-cloud infrastructure will rebound in 2021 but will flatten out at a CAGR of 0.5 percent, reaching $58.6 billion in 2025. Spending by service providers on compute and storage infrastructure is expected to grow at a 1.3 percent CAGR, reaching $115.4 billion in 2025.

For more information about IDC’s Quarterly Cloud IT Infrastructure Tracker, contact IDC’s Lidice Fernandez at lfernandez@idc.com.

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