Spending on both cloud and non-cloud infrastructure is forecast to suffer from the growing economic challenges in 2023, according to International Data Corporation’s (IDC) quarterly cloud server and storage spending assessments for 2022.

And a new Gartner report suggests that, for the first time ever, price is a key driver of increased spend for cloud services segments, rather than just increased usage, as more organizations look to trim costs.

IDC says that cloud spending will grow by 6.9 per cent to US$93.7 billion in 2023, but that is significantly lower than the 19.4 per cent annual growth recorded in 2022.

Gartner also expects spending in cloud services segment to grow only by 5.6 per cent in 2023, which it deems strong, amid economic turbulence.

Spending on shared cloud infrastructure might also take a hit after it grew 20 per cent in 2022; it is now expected to grow only 7.5 per cent year over year (YOY) to US$66.1 billion for 2023, IDC says.

But IDC expects shared cloud infrastructure to account for 71.7 per cent of the total cloud amount in 2027, growing at an 11 per cent compound annual growth rate (CAGR), from 2022 to 2027, and reaching US$103.5 billion.  

Spending on cloud infrastructure will also see consistent growth over the 2022-2027 forecast period, reaching US$144.3 billion in 2027.

Source: IDC

News site the Next Platform suggests that this would be a case of recessions accelerating IT transitions instead of triggering them, if these forecasts pan out.

Gartner adds that IT services segment will continue its growth trajectory through 2024, largely driven by the infrastructure-as-a-service market, which is projected to reach over 30 per cent growth this year.

But on premises spending is expected to suffer the most from economic downturns. It grew 13.6 per cent to US$66.7 billion in 2022, but is expected to face a decline of 10.3 per cent to US$59.8 billion in 2023.

Gartner also predicts staggered growth in spending on data centre systems, decreasing from 13.7 per cent in 2022 to only 3.7 per cent in 2023.

“CIOs face a balancing act that is evident in the dichotomies in IT spending,” said John-David Lovelock, distinguished VP analyst at Gartner. “For example, there is sufficient spending within data centre markets to maintain existing on-premises data centres, but new spending has shifted to cloud options, as reflected in the growth in IT services.”

This slump is expected to persist, as IDC forecasts spending on non-cloud infrastructure to grow at a CAGR of only 0.7 per cent.

IDC suggests that “cloud is staying positive due to the drive for modernization, opex focus, and continued growth in digital consumer services demand, while non-cloud spending contracts as enterprise customers shift towards capital preservation.”

Furthermore, the report showed that service providers, including cloud service providers and digital communications or managed service providers accounted for 56.9 per cent of the total market in 2022, spending a combined US$87.9 billion on compute and storage infrastructure, up 18 per cent YOY. IDC expects this number to grow, though again at a slower rate of 5.1 per cent in 2023.

Non-service providers like enterprises and governments also increased their spending by 15.4 per cent to US$66.4 billion in 2022.

Additionally, IDC showed that cloud spending increased in all regions, including Latin America, Middle East and Africa (MEA), Western Europe, and the U.S. except for Central and Eastern Europe (CEE), currently impacted by the Russia-Ukraine war. Spending in CEE declined significantly, by 54 per cent.

Growth is expected to persist in all regions in 2023, except for CEE.

The post Cloud spending to stagger as economic headwinds intensify: IDC first appeared on IT World Canada.

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