Data center infrastructure spending still growing as cloud providers keep buying

ODMs lead the way as public cloud nears 50% of data center hardware spend.

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Public cloud providers are quickly becoming the biggest buyers of data center infrastructure equipment, as purchasing of hardware and software both rebounded sharply in 2021, according to a recent report by Synergy Research Group.

Overall spending grew by roughly 10% in year-on-year terms, reaching a total of $185 billion in 2021. The lion’s share of that spending was on hardware, according to Synergy, with 77% of the total spend going towards servers, storage and networking gear. Software, including operating systems, cloud management, virtualization and network security, made up the rest of the total.

That $185 billion top-line number represents a substantial increase over 2020’s total, which clocked in at a little over $160 billion. The majority of the new spending was driven by heavier investments by public cloud providers, whose spending share rose 20% year-over-year, compared to just a 3% rise in enterprises (non-service- or cloud-providers) spending money on their own data centers in the same time period.

Equipment manufacturers selling directly to cloud providers accounted for the largest chunk of sales in that market segment. Of those vendors, the original design manufacturers (ODM) as a group came in first, with Dell, Microsoft and Inspur all roughly tied for second place in public cloud sales. Microsoft and Dell took the top spot for enterprise sales, followed by HPE, Cisco, VMware and IBM.

“The biggest story is the ever-increasing share of the market that is accounted for by sales to public cloud providers, who now account for almost half of all spending on data center gear,” said Synergy chief analyst John Dinsdale. “We forecast that these trends will continue over the next five years, with double-digit annual growth in sales to cloud providers helping to offset a somewhat flat enterprise market.”

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