IT infrastructure spending on products — servers, enterprise storage, and Ethernet switches — for cloud deployments will increase 12.4 percent, year over year in 2017 to $40.1 billion, according to an IDC report.
Public cloud data centers will account for the bulk of this infrastructure spending, or 60.7 percent. These will also grow at the fastest rate year over year: 13.8 percent.
Off-premises private cloud environments will represent 14.9 percent of overall spending and will grow 11.9 percent year over year. On-premises private clouds will account for 62.2 percent of spending on private cloud IT infrastructure and will grow 9.6 percent year over year.
The forecast illustrates an ongoing trend of hybrid- and multi-cloud adoption that has been well documented in recent studies. Some 85 percent of enterprises have a multi-cloud strategy, up from 82 percent in 2016, according to RightScale’s annual State of the Cloud Survey. This report also found hybrid cloud is the preferred enterprise strategy.
Enterprises’ cloud-first approach is driving the increase in cloud infrastructure spending, said IDC analyst Natalya Yezhkova.
“There are multiple benefits,” Yezhkova said. “When these jobs are moved to [cloud] service provider sites and the end-users pay a monthly fee for using these resources, they don’t have to worry about all of the other components like hardware maintenance, software maintenance, data center maintenance.”
Moving workloads to the cloud also gives companies the ability to scale up or down on demand.
“So if there’s a spike in the need for either computer or storage, it’s an additional cost for a certain period of time and when the spike passes they can scale down,” Yezhkova said. “They do not need to overprovision and overpay if certain resources are not needed.”
Traditional IT Infrastructure Spending Declines
Worldwide spending on traditional, non-cloud, IT infrastructure will decline 4.6 percent in 2017, according to the report. This accounts for 58.7 percent of the overall end-user spending on IT infrastructure products across the three segments, down from 62.6 percent in 2016.
In cloud IT environments, Ethernet switches will be the fastest growing technology segment with 25.8 percent year-over-year growth in 2017. Spending on servers and enterprise storage will grow 9.1 percent and 12.0 percent, respectively.
Over the five-year forecast, IDC expects spending on off-premises cloud IT infrastructure will have a compound annual growth rate (CAGR) of 11 percent, reaching $45.7 billion in 2021. Public cloud data centers will account for 79.8 percent of this amount with an 11 percent CAGR, while spending on off-premises private cloud infrastructure will increase at an 11.3 percent CAGR.
Combined with on-premises private cloud, overall spending on cloud IT infrastructure will have a five-year CAGR of 10.9 percent and by 2020 will surpass spending on non-cloud IT infrastructure.
Spending on on-premises private cloud IT infrastructure will grow at a 10.5 percent CAGR, while spending on non-cloud IT (on-premises and off-premises combined) will decline at a 3.1 percent CAGR during the same period.
Hybrid Cloud Strategy Is Key
A key take-away for vendors is that enterprises aren’t moving everything to the public cloud, Yezhkova said. Companies still prefer to keep some workloads in on-premises data centers. “So cloud service providers can appeal to these customers by helping them integrate hybrid-cloud and multi-cloud strategies. That’s where the providers can utilize their experience in helping end-users find the optimal balance between cloud and on-prem resources.”
The move caters to a growing demand from IT departments: they want to optimize the placement of their workloads between private and public clouds.
Other vendors are taking similar approaches to helping customers implement hybrid cloud business models.