Synergy Research Group announced that enterprise spending on cloud infrastructure services increased by 35% to almost $130 million in 2020. In the same year, enterprise spending on data center hardware and software dropped by 6% to under $90 billion. A year before, two markets were almost equal, but in 2020, the effect of the pandemic accelerated the shift worldwide.
Between 2010 and 2020, the average annual spending growth for data center was just 2% and for cloud services was 52%. The highest growth rates in the last 10 years were virtualization software, Ethernet switches, and network security. Within the cloud infrastructure services market, the major segments with the highest growth rates over the decade were mainly within PaaS, especially database, IoT, and analytics. John Dinsdale, a Chief Analyst, Synergy Research Group, said,
“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.
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.”