Server And Storage Spending To Recover In The Years Ahead

February 14, 2024 Timothy Prickett Morgan

A decade and a half ago, there was a very formal definition of what cloud infrastructure was, and the distinction between what most IT departments acquired or leased and what was rentable in the nascent clouds was obvious. Over the years, the lines have gotten fuzzier, with you being able to acquire systems with utility-style cloud pricing even though they are in your datacenter – just to give one example. Another is something called a bare metal cloud – what you and I might have called hosting in days gone by.

That fuzziness is why we always take any prognostications about cloud versus non-cloud spending with a whole container of Morton salt with iodine. But we do think that looking at aggregate spending on cloud and non-cloud infrastructure by the big clouds, the hyperscalers, and other enterprises of all sizes is useful. That is why we keep an eye on the Worldwide Quarterly Enterprise Infrastructure Tracker from IDC, and watch its trends like a hawk as the quarters roll by and the predictions extend out into the future.

IDC released its latest quarterly results for combined server and storage spending recently and also updated its forecast for 2023 spending and its forecast for spending out through 2027. Here is a chart showing the trend line for infrastructure spending by the clouds for their servers and storage (which they turn around and rent) as well as cloudy-style infrastructure that is used to build clouds, contrasted against what IDC calls “non-cloud” systems, by which we think it means bare metal and virtualized iron used to run mission critical applications statically in the datacenter. Like IBM i and System z platforms from Big Blue.

Here is the trend from 2014 for these two categories:

As you can see, sales of traditional non-cloud systems have their ups and downs, but are averaging just a little north of $15 billion a quarter. Spending on infrastructure to build clouds (remember, both servers and storage are in here, but not networking) in the datacenters of the world (whether they are so-called public clouds or private datacenters) is now six times as large over the decade of this dataset. And is nearly twice as large as the non-cloud portion.

The gap will continue to widen here when it comes to server and storage spending, but don’t get carried away. People are still going to buy their own infrastructure to mission-critical applications. Take a look at the IDC forecast compared to spending in 2022 and expected spending in 2023:

IDC has not reckoned the fourth quarter spending for servers and storage yet because many IT suppliers are still reporting their financial results. We will know how 2023 ended up sometime in April if history is any guide.

As we have pointed out before, we are in a server recession right now if you except the crazy spending on AI systems, mostly by the hyperscalers and cloud builders of the world with a bunch of startups and a few large enterprises. Storage is having its own issues in 2023, too. This is not a great environment to be the one who is asking the board of directors, the chief financial officer, or the company owner for a big pile of money.

The important thing for IBM i shops is to see that server and storage spending has a compound annual growth rate (CAGR) of 7.4 percent across all categories between 2022 and 2027, which is a higher growth rate than the global economy. It is also higher than the inflation rate.

The other important thing to see here is that non-cloud spending doesn’t just disappear in the future. It just keeps a-humming along. So does spending at enterprises, governments, and academic and research institutions. The whole IT world doesn’t just end up in cloud datacenters and service providers.

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