Shared Cloud Infrastructure Spending Driving Growth in Overall Enterprise Infrastructure Spending in the Third Quarter of 2023, According to IDC

According to the International Data Corporation (IDC) Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment, spending on compute and storage infrastructure products for cloud deployments, including dedicated and shared IT environments, increased 2.9% year over year in the third quarter of 2023 (3Q23) to $25.4 billion. Spending on cloud infrastructure continues to outgrow the non-cloud segment with the latter declining 8.2% in 3Q23 to $14.9 billion. The cloud infrastructure segment experienced a decline in unit demand of 23.9% with an increase in average selling prices (ASPs) mostly related to higher than usual GPU server shipments to hyperscalers.

"Cloud infrastructure spending continues shifting towards robust configurations aiming to address more complex workloads and supporting new AI initiatives," said Juan Pablo Seminara, research director, Worldwide Enterprise Infrastructure Trackers. "While some caution remains in face of the economic and socio-political challenges ahead, the spending outlook for 2024 is very positive with growth centered on the expectation that cloud-based spending will rebound at a double-digit pace throughout the year."

Spending on shared (public) cloud infrastructure reached $18.5 billion in the quarter, increasing 7.2% compared to a year ago. The shared cloud infrastructure category continues capturing the largest share of spending compared to dedicated deployments and non-cloud spending, accounting for 45.9% of total infrastructure spending in 3Q23. The dedicated (private) cloud infrastructure segment declined 7.2% year over year in 3Q23 to $6.9 billion.

For 2023, IDC is forecasting cloud infrastructure spending to grow 9.7% compared to 2022 and totaling $100.6 billion for the year. Non-cloud infrastructure is expected to decline 7.7% to $58.7 billion. Shared cloud infrastructure is expected to grow 13.9% year over year to $72.2 billion for the full year, while spending on dedicated cloud infrastructure is expected to remain flat (0.3% growth) in 2023 and reaching $28.3 billion for the full year. The subdued growth forecast for non-cloud infrastructure reflects the headwinds the market is facing while cloud spending remains strong due to new and existing mission-critical workloads, which often require higher-end, performance-oriented systems.

IDC's service provider category includes cloud service providers, digital service providers, communications service providers, hyperscalers, and managed service providers. In 3Q23, service providers as a group spent $24.9 billion on compute and storage infrastructure, up 1.7% from the prior year. This spending accounted for 61.7% of the total market. Non-service providers (e.g., enterprises, government, etc.) decreased their spending to $15.4 billion, a 6.3% decline year over year. IDC expects compute and storage spending by service providers to reach $98.5 billion in 2023, growing 8.3% year over year.

On a geographic basis, year-over-year spending on cloud infrastructure in 3Q23 showed mixed results, with Canada, Central & Eastern Europe (CEE) (impacted by the Russia-Ukraine war), Western Europe (affected by high energy prices and a tight macroeconomic environment), Middle East & Africa (MEA), and Latin America all showing negative growth. Cloud infrastructure spending in Canada declined 26.7% year over year; CEE was down 20.8%; Western Europe fell 15.4%; Middle East & Africa dropped 2.0%; and Latin America fell 0.7%. The regions with increased spending in 3Q23 were Japan, China, Asia/Pacific (excluding Japan and China), and the United States. Cloud spending in these regions grew 16.0%, 15.5%, 10.0%, and 0.9% year over year, respectively.

Long term, IDC predicts global spending on cloud infrastructure will have a compound annual growth rate (CAGR) of 10.6% over the 2022-2027 forecast period, reaching $152.0 billion in 2027 and accounting for 68.8% of total compute and storage infrastructure spend. Shared cloud infrastructure spending will account for 70.5% of the total cloud spending in 2027, growing at a 11.1% CAGR and reaching $107.1 billion. Spending on dedicated cloud infrastructure will grow at a CAGR of 9.7% to $44.9 billion. Spending on non-cloud infrastructure will remain relatively flat with a 1.6% CAGR, reaching $68.9 billion in 2027. Spending by service providers on compute and storage infrastructure is expected to grow at a 10.4% CAGR, reaching $148.9 billion in 2027.

A graphic illustrating IDC's 2022-2027 forecast for worldwide enterprise infrastructure spending by deployment category (Cloud & Shared, Cloud & Dedicated, Non-Cloud & Dedicated) is available by viewing this press release on IDC.com.

IDC's Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment is designed to provide clients with a better understanding of what portion of the compute and storage hardware markets are being deployed in cloud environments. The Tracker breaks out each vendors' revenue into shared and dedicated cloud environments for historical data and provides a five-year forecast. This Tracker is part of the Worldwide Quarterly Enterprise Infrastructure Tracker, which provides a holistic total addressable market view of the four key enabling infrastructure technologies for the datacenter (servers, external enterprise storage systems, and purpose-built appliances: HCI and PBBA).

Taxonomy Notes

IDC defines cloud services more formally through a checklist of key attributes that an offering must manifest to end users of the service.

Shared cloud services are shared among unrelated enterprises and consumers; open to a largely unrestricted universe of potential users; and designed for a market, not a single enterprise. The shared cloud market includes a variety of services designed to extend or, in some cases, replace IT infrastructure deployed in corporate datacenters; these services in total are called public cloud services. The shared cloud market also includes digital services such as media/content distribution, sharing and search, social media, and e-commerce.

Dedicated cloud services are shared within a single enterprise or an extended enterprise with restrictions on access and level of resource dedication and defined/controlled by the enterprise (and beyond the control available in public cloud offerings); can be onsite or offsite; and can be managed by a third-party or in-house staff. In dedicated cloud that is managed by in-house staff, "vendors (cloud service providers)" are equivalent to the IT departments/shared service departments within enterprises/groups. In this utilization model, where standardized services are jointly used within the enterprise/group, business departments, offices, and employees are the "service users."

For more information about IDC's Quarterly Enterprise Infrastructure Tracker: Buyer & Cloud Deployment, please contact Lidice Fernandez at lfernandez@idc.com.

About IDC Trackers

IDC Tracker products provide accurate and timely market size, vendor share, and forecasts for hundreds of technology markets from more than 100 countries around the globe. Using proprietary tools and research processes, IDC's Trackers are updated on a semiannual, quarterly, and monthly basis. Tracker results are delivered to clients in user-friendly Excel deliverables and on-line query tools.

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About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,300 analysts worldwide, IDC offers global, regional, and local expertise on technology, IT benchmarking and sourcing, and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly owned subsidiary of International Data Group (IDG), the world's leading tech media, data, and marketing services company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC and LinkedIn. Subscribe to the IDC Blog for industry news and insights.

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Worldwide spending on compute and storage infrastructure products for cloud deployments increased 2.9% year over year in Q3 2023 while spending on non-cloud infrastructure declined 8.2% in the quarter, according to IDC.