NEEDHAM, MA – Spending on compute and storage infrastructure products for cloud infrastructure, including dedicated and shared environments, decreased 2.4% year-over-year in the second quarter to $16.8 billion, according to International Data Corp.
This decrease comes after six quarters of year-over-year growth, and most notably compares to the 39.1% annual growth seen by the market in the second quarter of 2020, when the world entered the pandemic with the first wave of business and country closures, causing a spike in investments in cloud services and infrastructure.
Investments in non-cloud infrastructure increased 3.4% year-over-year to $13.4 billion in the second quarter, recovering from a 7.2% decline in the prior year period.
Spending on shared cloud infrastructure reached $11.9 billion, a decrease of 6.1% year-over-year, a sequential 17% increase. Weakness in year-over-year demand from public cloud service providers comes after an exceptionally strong second quarter 2020, in which spending increased 55.5%, driven by the spike in demand for cloud services in the first months of the pandemic, says IDC.
IDC expects to see continuously strong demand for shared cloud infrastructure, with shared cloud infrastructure spending surpassing non-cloud infrastructure spending by 2022. Spending on dedicated cloud infrastructure increased 7.8% year-over-year in the second quarter to $4.9 billion, with 46.5% of this amount deployed on customer premises. IDC expects cloud environments will continue to outpace non-cloud throughout its forecast.
Despite weakness during the period, IDC forecasts cloud infrastructure spending to grow 12% to $74.3 billion for 2021, while non-cloud infrastructure is expected to grow 2.7% to $58.9 billion after two years of declines. Shared cloud infrastructure is expected to grow 11.1% year-over-year to $51.4 billion for the full year. Spending on dedicated cloud infrastructure is expected to grow 14.1% to $22.8 billion for 2021.
In the second quarter, service providers spent $17.1 billion on compute and storage infrastructure, down 1.9% compared to the second quarter last year, up 13.6% sequentially. (The service provider category includes cloud service providers, digital service providers, communications service providers, and managed service providers.) This spending accounted for 56.5% of total compute and storage infrastructure market. IDC expects compute and storage spending by service providers to reach $74.6 billion in 2021, growing 10.5% year-over-year.
During the quarter, spending increased across the Asia/Pacific subregions, in Latin America, Canada, and Central and Eastern Europe, and declined in the US, Western Europe, and the Middle East and Africa. Canada showed the strongest year-over-year increase in cloud infrastructure spending at 25.6%, while Western Europe recorded the strongest decline at 8.8%. For the full year, spending on cloud infrastructure is expected to increase across all regions compared to 2020.
Dell Technologies, HPE/H3C, and Lenovo/Lenovo NetApp Technologies increased sales, while Inspur/Inspur Power Systems and Huawei experienced declines.
IDC expects spending on compute and storage cloud infrastructure to have a CAGR of 12.4% over the 2020-2025 forecast period, reaching $118.8 billion in 2025, accounting for 67.3% of total compute and storage infrastructure spend. Shared cloud infrastructure will account for 69.9% of this amount, growing at a 12.4% CAGR. Spending on dedicated cloud infrastructure will grow at a CAGR of 12.3%. Spending on non-cloud infrastructure will rebound in 2021 but will flatten out at a CAGR of 0.1%, reaching $57.7 billion in 2025. Spending by service providers on compute and storage infrastructure is expected to grow at an 11.2% CAGR, reaching $115 billion in 2025.
