Vendor revenue from sales of IT infrastructure products for cloud environments, including public and private cloud, increased 11.4 per cent year-over-year during the first quarter of 2019 (1Q19), reaching $14.5 billion.
Spanning server, enterprise storage and ethernet switch offerings, IDC has lowered its forecast for investments in this area, expected to amount to $66.9 billion. This is down 4.5 per cent from last quarter's forecast, with slower year-over-year growth of 1.6 per cent.
"As the overall IT infrastructure goes through a period of slowdown after an outstanding 2018, the important trends might look somewhat distorted in the short-term," said Natalya Yezhkova, research vice president of IDC.
According to IDC, vendor revenue from hardware infrastructure sales to public cloud environments in 1Q19 was down 13.4 per cent compared to the previous quarter (4Q18) but increased 8.9 per cent year-over-year to $9.8 billion.
Yezhkova said this segment of the market continues to be highly impacted by demand from a “handful of hyper-scale 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 per cent decrease from 2018,” the report added. “Although it will continue to account for the majority of spending on cloud IT environments, its share will decrease from 69.1 per cent in 2018 to 66.5 per cent in 2019.”
On the flip side, 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 per cent year-over-year reaching $4.7 billion. IDC expects spending in this segment to grow 10.1 per cent year-over-year in 2019.
"IDC's long-term expectations strongly back continuous growth of cloud IT infrastructure environments,” Yezhkova added. “With vendors and service providers finding new ways of delivering cloud services, including from IT infrastructure deployed at customer premises, end-users have fewer obstacles and pain points in adopting cloud/services-based IT.”
Overall, Yezhkova said 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 per cent mark for the first time but has since fallen below this "important threshold".
Meanwhile in 1Q19, cloud IT environments accounted for 48.8 per cent of vendor revenues. For the full year 2019, spending on cloud IT infrastructure will remain just below the 50 per cent mark at 49.4 per cent.
“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,” the report added.
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 per cent, while spending on storage platforms will grow slightly at 1.9 per cent. Meanwhile, compute platforms will decline by 2.8 per cent 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 (non-cloud) IT environments remained flat compared to 1Q18.
For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 3.5 per cent, as the technology refresh cycle that drove market growth in 2018 is winding down.
By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 42.4 per cent of total worldwide IT infrastructure spending (down from 51.9 per cent in 2018). This share loss and the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.