2020 – The Year that Cloud Service Revenues Finally Dwarfed Enterprise Spending on Data Centers
RENO, NV, March 18, 2021
New data from Synergy Research Group shows that enterprise spending on cloud infrastructure services continued to ramp up aggressively in 2020, growing by 35% to reach almost $130 billion. Meanwhile enterprise spending on data center hardware and software dropped by 6% to under $90 billion. This continued a decade-long trend of explosive growth in cloud and virtual stagnation in the market for enterprise-owned data center equipment. In 2019 the two markets were almost equal in size but in 2020 COVID-19 helped to further fuel this major shift in worldwide IT operations. Over the decade, average annual spending growth for data center was just 2% and for cloud services (IaaS, PaaS and hosted private cloud) was 52%. In 2020 worldwide spending on enterprise data center hardware and software (comprising servers, storage, networking, security and associated software) was $89 billion. The major segments with the highest growth rates over the decade were virtualization software, Ethernet switches and network security. Server share of the total data center market remained steady while storage share declined. Within the $130 billion cloud infrastructure services market, the major segments with the highest growth rates over the decade were mainly within PaaS – especially database, IoT and analytics. IaaS share of the total held reasonably steady while managed private cloud service share declined somewhat.
“Over the last ten years we have seen a dramatic increase in computer capabilities, increasingly sophisticated enterprise applications and an explosion in the amount of data being generated and processed, resulting in an ever-growing need for data center capacity. However, 60% of the servers now being sold are going into cloud providers’ data centers and not those of enterprises,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “When a company needs computing power to manage its data and to run its business apps, it can either invest in its own data center infrastructure or it can use cloud services provided by a public cloud provider. Clearly companies have been voting with their wallets on what makes the most sense for them. We do not expect to see such a drastic reduction in spending on enterprise data centers over the next five years, but for sure we will continue to see aggressive cloud growth over that period.”
About Synergy Research Group
Synergy provides quarterly market tracking and segmentation data on IT and Cloud related markets, including vendor revenues by segment and by region. Market shares and forecasts are provided via Synergy’s uniquely designed online database SIA ™, which enables easy access to complex data sets. Synergy’s Competitive Matrix ™ and CustomView ™ take this research capability one step further, enabling our clients to receive on-going quantitative market research that matches their internal, executive view of the market segments they compete in.
Synergy Research Group helps marketing and strategic decision makers around the world via its syndicated market research programs and custom consulting projects. For nearly two decades, Synergy has been a trusted source for quantitative research and market intelligence. Synergy is a strategic partner of TeleGeography.
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