Cloud Spending Will Top $37 Billion In 2016, IDC Reports

A new forecast from IDC finds that spending on public and private cloud infrastructure will increase more than 15% this year, for a total of $37.1 billion. By 2020, IDC forecasts that spending on cloud services will nearly equal what is spent on traditional IT.

Charles Babcock, Editor at Large, Cloud

July 8, 2016

3 Min Read
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IT spending on cloud infrastructure -- servers, enterprise storage, and Ethernet switches for the enterprise private cloud and colocation services -- will increase by 15.5% in 2016 to reach $37.1 billion, according to IDC's latest Worldwide Quarterly Cloud IT Infrastructure Tracker forecast.

The forecast includes estimates of hardware purchases to support IT services used in a variety of settings: On-premises as the enterprise private cloud and off-premises as public cloud services. It also appears to include private cloud off-premises at colocation facilities and wholesale data centers.

Spending on public cloud services is the fastest growing segment at 18.8% in 2016, according to the forecast. That would amount to $23.3 billion of the $37.1 billion total, according the forecast's coauthor, Natalya Yezhkova, IDC's director of storage systems research.

Spending on private cloud infrastructure is growing at 10.3% to $13.8 billion. About 60% of the private cloud spend occurs on-premises, with the rest at various off-premises colocation and data center-for-rent facilities.

The amount spent on cloud infrastructure is still dwarfed by traditional IT spending on servers, storage, and switches, which represents 63.4% of the IT budget and will total about $64.3 billion in 2016, according to the July 5 IDC report.

However, traditional IT spending is shrinking at a rate of 4.4% a year in 2016, the forecast stated.

When it comes to the primary cloud infrastructure components, spending is growing the fastest on Ethernet switches at 39.5%; spending on servers, 11.4%; and spending on storage, 14.2%, IDC found.

The spending patterns described in the forecast apply in equal measure to all regions around the world, with cloud spending consistently growing faster than traditional IT infrastructure spending.

"The economic and financial volatility we see in some regions will push demand further as increasing sophistication of the public cloud offerings allows organizations to fulfill their needs across a growing variety of IT domains," Yezhkova wrote in the report. The fact that cloud expenses are operating expenses rather than capital expenses favors the cloud in a time of "tightening IT budgets," she noted.

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For that reason she expects spending on cloud infrastructure to pick up its pace in the second half of 2016.

The long-term forecast sees spending on IT infrastructure for cloud environments growing at a 13.1% compound annual growth rate, which will result in a total spend of $59.5 billion in 2020, or 48.7% of the total spending on enterprise IT infrastructure.

The public cloud will attract the greater share: Public cloud spending will grow at 18.8%, while private cloud grows at a 10.3% rate. Public cloud service providers will spend $38.4 billion to meet the demand for IT services, while private cloud IT infrastructure will reach $21.1 billion.

Spending on non-cloud IT infrastructure will continue to decline at a 1.4% compound annual growth rate through 2020.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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