Cloud spending surpasses data center spending for the first time

27.02.2020 105

People in the IT industry have been talking about the “cloud era” for a very long time. The truth is that during that time, the cloud was actually still forming. According to a report by the Synergy Research Group (SRG), it was in 2019 when the cloud era actually began.

It’s when the enterprise spending on the cloud finally surpassed the enterprise spending on data centers for the first time. Total spending on cloud infrastructure in 2019 is about $97 billion, SRG notes. This is a jump of 38%. Meanwhile, spending on data center hardware and software reached $93 billion and just 1% growth.

A lot of “as-a-Sevices”

So, why is this happening? It’s simple. Enterprises see more value and ease to invest in the cloud than in their own data centers. The explosion of “as-a-Service”..services also played a key role. There are plenty of such offers like Iaas, Paas, SaaS and many more. Add to that the vast options of private, public and hybrid cloud setups and you have a winner.

SRG has been following this trend since 2009. Тhe first five years were characterized with minimal cloud spending compared to the on-premises data center spending. In 2016, though, things started to ramp up and cloud spending quickly grew. SRG calculates that spending on the cloud has been rising by nearly 56% every year since 2009. Meanwhile, the data center spending has been rising by just an average 4% per year with a drop in 2016.

Still, spending on data centers has remained largely stagnant while the cloud has been rising fast. With the new decade on the horizon, we might expect that data center spending will start falling. After all, many enterprises are now on the cloud and will continue to invest heavily in that area.

Is the data center doomed?

Not quite. After all the cloud has to “live” somewhere, right? The data center market is changing, though. For years it was the main focus of enterprises and they had to set up their data centers in order to function. Now, the data center moves to the background. Enterprises focus on the cloud and the related services. They will care less and less about the actual data center.

Instead, cloud service providers take on the data center care and development. So, as the need for cloud services continues to rise, so will the need for data centers. The spending on them, though, will no longer be on the budget sheets of the enterprises. It will move to the cloud service providers.

SRG has tracked this change. It says that more than half of the servers sold are already going into the cloud providers’ data centers, not the enterprises’ own data centers. This trend will continue.

Of course, many enterprises will keep their own data centers for a very long time to come. There are plenty of reasons for that. But they will also continue investing in the cloud, too. Basically, the cloud will continue being the main beneficiary of spending and it seems it’s just getting started.