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Cloud hardware spend hits US$8.4bn/quarter, as traditional kit sinks

2017 forecast to see cloud kit clock $11bn every 90 days

By Simon Sharwood, 16 Jan 2017

Abacus-shuffling outfit IDC has updated its Worldwide Quarterly Cloud IT Infrastructure Tracker with sales data for Q3 2016 and predictions for spend in 2017.

In 2016's third quarter the firm says “vendor revenue from sales of infrastructure products (server, storage, and Ethernet switch) for cloud IT, including public and private cloud, grew by 8.1 per cent year over year to $8.4 billion.” Don't get too excited: IDC says that growth happened without a spurt in hyperscale builds.

“The overall share of cloud IT infrastructure sales climbed to 39.2 per cent of all IT infrastructure spending in 3Q16, up from 34.7 per cent a year ago,” the firm says. Of that lovely loot, private cloud accounted for $3.3 billion with the rest going to public clouds.

On the flipside, “revenue in the traditional (non-cloud) IT infrastructure segment decreased 10.8 per cent year over year in the third quarter.”

Ouch.

The firm says Ethernet switches were the star in Q3, clocking up 60.8 per cent year-over-year growth on-premises and 46.2 per cent in the public cloud. On-premises server sales sank by 12.9 per cent year over year and storage slumped by 8.6 per cent.

As 2017 unfurls, IDC reckons a new wave of hyperscale data centre builds, plus service providers building their own clouds, will see cloud hardware spend “increase by 18.2 per cent … to reach $44.2 billion.”

Most of that moolah (61.2 per cent) will go to public clouds, with another 14.6 points to be spent on “off-premises private cloud environments”.

On-premises players are going to have a harder time of it as “spending on traditional, non-cloud, IT infrastructure will decline by 3.3 per cent in 2017.”

It's not all doom and gloom, though, as on-prem kit will “still account for the largest share (57.1 per cent) of end user spending. IDC counts private clouds as on-prem kit and reckons those rigs “will grow faster than public cloud while investments on non-cloud infrastructure will decline.”

As the table below shows, Dell and HPE are duking it out at the top of the market, with Cisco a close third. Lenovo's numbers are interesting: this time last year the company had $250m of revenue after gobbling IBM's server unit. This year it's added just $47m, just 0.2 per cent market share and is growing far slower than the three aforementioned companies. Huawei, by contrast, can point to 68.4 revenue growth.

Top 5 Vendor Groups, Worldwide Cloud IT Infrastructure Vendor Revenue, Q3 2016 (Revenues are in Millions, Excludes double counting of storage and servers)

Vendor Group

3Q16 Revenue (US$M)

3Q16 Market Share

3Q15 Revenue (US$M)

3Q15 Market Share

3Q16/3Q15 Revenue Growth

1. Dell Technologies*

$1,301

15.5%

$1,370

17.6%

-5.0%

1. Hewlett Packard Enterprise*

$1,250

14.9%

$1,247

16.0%

0.2%

3. Cisco

$1,029

12.2%

$766

9.8%

34.2%

4. Lenovo*

$297

3.5%

$270

3.5%

10.0%

4. Huawei*

$274

3.3%

$163

2.1%

68.4%

4. NetApp*

$239

2.8%

$258

3.3%

-7.5%

4. Inspur*

$218

2.6%

$160

2.1%

36.5%

ODM Direct

$2,134

25.4%

$2,100

27.0%

1.6%

Others

$1,672

19.9%

$1,449

18.6%

15.4%

Total

$8,413

100%

$7,783

100%

8.1%

IDC's Worldwide Quarterly Cloud IT Infrastructure Tracker, January 2017

* Table Note: Dell Technologies and Hewlett Packard Enterprise ranked number 1 in a statistical tie; Lenovo, Huawei, NetApp, and Inspur all ranked number 4 in 3Q16 in a statistical tie. IDC declares a statistical tie in the worldwide cloud IT infrastructure market when there is less than one percent difference in the revenue share of two or more vendors.

IDC doesn't say why switches are doing so well: The Register's cloud desk reckons it's because ultra-dense cloud rigs just can't be built with old switches and that cloud builds necessitate lots of expensive top-of-rack kit, plus lovely new backbones. ®

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