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IDC predicts slowdown in public cloud infrastructure spend will be short-lived

IDC claims prospect of overseas datacentre builds and growing enterprise demand for off-premise services should ensure sales of IT infrastructure increase through 2016

The downturn in global demand for IT infrastructure from the public cloud provider community during the first quarter of 2016 is likely to be relatively short-lived, according to IDC.

The market watcher’s latest Worldwide Quarterly Cloud IT Infrastructure Tracker revealed a softening in demand for servers, storage and Ethernet switches for use in public cloud environments during the first three months of 2016.

While investments in cloud IT infrastructure have risen to account for a larger percentage of global IT spend, IDC’s report acknowledges the slowdown in demand for IT kit from the public cloud provider community negatively affected first-quarter sales growth.

“A slowdown in hyperscale public cloud infrastructure deployment demand negatively impacted growth in both public cloud and cloud IT overall,” said IDC computing platforms research director Kuba Stolarski.

Private cloud deployment growth also slowed, as 2016 began with difficult comparisons to the first quarter of 2015, when server and storage refresh drove a high level of spend and high growth.

“As the system refresh has mostly ended, this will continue to push private cloud and, more generally, enterprise IT growth downwards in the near term,” added Stolarski.

The IDC report showed that cloud infrastructure accounted for around 32.3% of overall IT spend during the first quarter, having risen from 30.2% over the past 12 months.

The amount generated by sales of private cloud infrastructure grew by 6.8% year-on-year to $2.8bn, while the public cloud achieved revenue growth of 1.9% amounting to $3.9bn.

Conversely, the revenue generated by non-cloud IT infrastructure was down by 6% year-on-year, on the back of an overall drop in demand for on-premise servers and storage.

Read more about cloud spending trends

Infrastructure spend fuelled by overseas datacentres

The recent run of cloud service providers announcing overseas datacentre builds should ensure demand for cloud IT infrastructure returns to normal during subsequent quarters, said IDC, but there are a few things on the horizon that could have an uncertain effect on the market.

“With geopolitical wildcards such as Brexit looming, end customers’ decisions about where and how to deploy IT resources may be impacted,” said Stolarski.

“If new data sovereignty concerns arise, service providers will experience added pressure to increase local datacentre presence, or face potential loss of certain customers’ workloads.”

Looking ahead

Following the publication of IDC’s latest Cloud IT Infrastructure Tracker, the analyst house has also released details of its spending forecast for the year ahead, and predicts the public cloud provider community to step up its investments in new IT kit during the second half of 2016.

IDC anticipates the amount spent on cloud IT infrastructure will hit $37.1bn in 2016, which equates to a 15.5% year-on-year rise, driven primarily by strong investment growth in the public cloud market.

To back this point, IDC predicts the amount spent on public cloud IT infrastructure will rise by 18.8% in 2016 to $23.3bn, while investments in private cloud infrastructure will increase by 10.3% year-on-year to $13.8bn.

IDC storage systems research director Natalya Yezhkova said: “We will continue to see steady growth in demand for public cloud services and, as a result, underlying spending on IT infrastructure by cloud service providers.

She added: “The economic and financial volatility we see in some regions will push demand further as increasing sophistication of public cloud offerings allows organisations to fulfil their needs across a growing variety of IT domains, while operational expenditure-oriented pricing models provide some relief to tightening IT budgets.”

Read more on Infrastructure-as-a-Service (IaaS)

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