Cloud spending surpasses data center costs for the first time

In 2020, the cost of services dedicated to the deployment and operation of cloud infrastructure exceeded the cost of data centers for the first time . This is evidenced by data from the analytical company Synergy Research.

Experts calculated that sales of IaaS , PaaS , and managed private clouds globally reached almost $ 130 billion by the end of 2020, an increase of 35% compared to 2019. At the same time, $ 89 billion was spent on equipment ( servers , storage systems , network equipment, cybersecurity solutions ) and software for data centers, which is 6% less than a year earlier. Performance in these markets was similar in 2019, but the COVID-19 coronavirus pandemic has spurred demand for cloud-based tools.

From 2010 to 2020, sales of equipment for data centers increased by an average of 2% per year, while the growth rate of spending on services for cloud infrastructure was measured by 52%.

In the data center hardware and software market, the largest and fastest growing segments in a decade were virtualization software , Ethernet switches , and network security. The share of the server category in the data center equipment market remained stable, but in the storage segment, indicators decreased.

Cloud spending surpasses data center costs for the first time in 2020
In the market for services for the deployment of cloud infrastructure, among the leading areas with the highest growth rates in a decade, experts listed PaaS (platform as a service), IoT and analytics. The share of the IaaS (infrastructure as a service) segment was quite stable, while the share of services for managed private clouds fell slightly.

Over the past 10 years, we have witnessed a dramatic increase in the capabilities of computer systems, the complexity of corporate applications, and an increase in the amount of generated and processed data. All of this, in turn, leads to an ever increasing demand for data center capacity. However, 60% of servers sold today are not used in corporate data centers, but in the data center of cloud providers, says John Dinsdale, lead analyst at Synergy Research. “When a company needs computing power to manage data and run business applications, it can either invest in its own data center infrastructure or use cloud services offered by public cloud providers. Obviously, companies are opting for the economical option, and that makes sense for many of them.    

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The expert added that, most likely, a strong reduction in costs for corporate data centers is not expected in the next five years, at the same time, the rapid growth of the cloud market is very likely.


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