Cloud spending outstrips on-premises investments for the first time

Enterprise spending on cloud infrastructure bypassed spending on data center hardware and software for the first time in 2020, as the COVID-19 pandemic accelerated a decade-long industry trend towards running enterprise workloads in the cloud instead of on-premises servers.

That’s according to the latest data from Synergy Research Group, which shows that enterprise spending on cloud infrastructure services (IaaS, PaaS, and hosted private cloud combined) grew by 35% to reach almost $130 billion in 2020, while enterprise spending on data center hardware and software dropped by 6% to less than $90 billion over the same period.

Over the last decade, enterprise cloud spending has grown significantly from a base of virtually zero in 2010, compared to stagnating data center spending, which has grown just 2% on average annually over that period.

The data also shows that 60% of new server sales are now going into the data centers of the cloud providers themselves, instead of to individual organizations, marking a major shift in the customer base for the hardware makers.

“While 2020 can be viewed as something of an anomaly due to COVID-19, the trends are absolutely clear, and we expect them to continue for many years to come,” said John Dinsdale, chief analyst at Synergy Research Group.

Companies of all shapes and sizes—from charities like Anthony Nolan to retailers like Sainsbury’s and oil and gas giants like BP—are increasingly looking to exit their on-premises data centers, and the pandemic has pushed many of those plans into fifth gear.

Copyright © 2021 IDG Communications, Inc.

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