Vendor revenue from sales of IT infrastructure products (server, enterprise storage, and Ethernet switch) for cloud environments, including public and private cloud, declined 1.8% year over year in the third quarter of 2019 (3Q19), according to IDC's Worldwide Quarterly Cloud IT Infrastructure Tracker. The decline was softer than the dip experienced in 2Q19, and leading IDC to slightly increase its forecast for total spending on cloud IT infrastructure in 2019 to $65.4 billion, which represents flat performance compared to 2018.
IDC said the decline in cloud IT infrastructure spending was driven by the public cloud segment, which was down 3.7% year over year, reaching $11.9 billion; sequentially from 2Q19, this represents a 24.4% increase. As the overall segment is generally trending up, it tends to be more volatile quarterly as a significant part of the public cloud IT segment is represented by a few hyperscale service providers.
Some highlights:
- Vendor revenue in the public cloud IT segment is expected to reach $44 billion in sales for the full year 2019, a decline of 3.3% from 2018.
- Vendor revenue in the private cloud IT segment increased 3.2% year over year, reaching nearly $5 billion. IDC expects spending in this segment to grow 7.2% year over year in 2019 to $21.4 billion.
- The IT infrastructure industry is approaching the point where spending on cloud IT infrastructure consistently surpasses spending on non-cloud IT infrastructure. In 3Q19, cloud IT environments accounted for 53.4% of vendor revenues. However, for the full year 2019, spending on cloud IT infrastructure is expected to stay just below the 50% mark at 49.8%. This year (2020) is expected to become the tipping point with spending on cloud IT infrastructure staying in the 50+% range.
- Vendor revenue for Ethernet switches is the only segment expected to deliver visible year-over-year growth in 2019, up 11.2%, while spending on compute platforms will decline 3.1% and spending on storage will grow just 0.8%. Compute will remain the largest category of cloud IT infrastructure spending at $34.1 billion.
- Sales of IT infrastructure products into traditional (non-cloud) IT environments declined 7.7% from a year ago in 3Q19.
- For the full year 2019, worldwide spending on traditional non-cloud IT infrastructure is expected to decline by 5.3%.
- By 2023, IDC expects that traditional non-cloud IT infrastructure will only represent 41.9% of total worldwide IT infrastructure spending (down from 51.6% in 2018).
- Geographically, declines in the U.S., Western Europe, and Latin America were driven by overall market weakness; in these and some other regions 3Q19 softness in cloud IT infrastructure spending was also affected by comparisons to a strong 3Q18. In Asia/Pacific (excluding Japan), the second largest geography after the U.S., spending on cloud IT infrastructure increased 1.2% year over year, which is low for this region. However, it is in comparison with strong double-digit growth in 2018. Other growing regions in 3Q19 included Canada (4.9%), Central & Eastern Europe (4.6%), and Middle East & Africa (18.1%).
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