This should come as no surprise, but spending on data-center hardware and software dipped in Q1 and cloud sales grew, but neither as much as you would think.\nQ1 figures from Synergy Research Group show that spending on enterprise software and hardware shrank globally by a modest 2% year on year to $35.8 billion, with the biggest non-cloud players, such as Microsoft, Dell, HPE, Cisco and VMware, down 4%.\n\nWhen it comes to public cloud infrastructure, sales rose 3% to $9.66 billion year on year. The top vendors were Chinese ODMs that hyperscalers like: Dell, Microsoft, Inspur and Cisco.\nThese are low single-digit changes that would not be surprising in a normal quarter, and the first quarter was anything but normal. John Dinsdale, chief analyst Synergy, said it\u2019s the sum total of gains in some areas and losses in others.\n\u201c[Halting sales] happened in many markets generally and in some IT markets, but some IT markets came through just fine in the first quarter and kept on growing at pace \u2013 cloud services, SaaS, UCaaS, colocation, cloud data-center infrastructure, cloud conferencing services, elements of video conferencing, etc. Other areas didn\u2019t come through unscathed but didn\u2019t do too badly, WLAN being an example,\u201d he said via email.\nIn the case of data-center hardware and software, Synergy breaks it down into two parts: shipments supporting public-cloud data centers, which kept on growing, and shipments supporting enterprise data centers, which declined. Then, within the enterprise data-center segment, hardware was down quite sharply while the software segments did OK.\nThat decline in hardware sales is reflected in the first-quarter server-sales research from IDC. It reported that in the first quarter, the worldwide server revenue declined 6% year over year to $18.6 billion during the first quarter of 2020. Worldwide server shipments declined 0.2% year over year. That\u2019s because the decline was greater among high-end system as compared to cheaper, volume servers.\nThere were some steep declines, too. Dell revenue dropped 13% year over year but remains the revenue leader, with 18.7% of total market revenue. HPE\u2019s revenue fell 18.7% and is in second place with 15.5% revenue share. Lenovo slipped 7.8% and is tied with IBM for fourth place. IBM was the one U.S. OEM to gain ground with a 16.3% growth in revenue.\nSebastian Lagana, research manager, Infrastructure Platforms and Technologies at IDC, said IBM was up almost entirely due to System Z mainframe sales. Power-based system sales were very bad during the quarter, though.\n\u201cZ15\u2019s release started a new mainframe refresh cycle for IBM, which tends to provide very strong results for a handful of quarters (usually 4 or 5),\u201d he said via email. \u201cThat\u2019s been ongoing for a couple quarters now. I\u2019d note that Z is very cyclical in that you can see it up 60% y\/y during refresh cycles, then a drop to -60% when off refresh. It tends to be less tied to market dynamics, especially compared to more volume-oriented x86 sales.\u201d\u00a0\nColocation Heats Up\nAnother report from Synergy says hyperscale operators are the fastest-growing customer category for colocation providers. The overall colocation market grew by 7% in the first quarter of 2020 when compared to Q1 of 2019, but revenues from hyperscale operators grew by 22% in the wholesale segment of the market and by 9% in the retail segment.\nService providers were the next fastest growing customer category for colo providers, followed by enterprise customers. Enterprise spending on wholesale colocation was relatively flat in Q1, while enterprise spending on retail colocation did continue to grow steadily.\nWhy? In part because hyperscalers tend to put data centers in remote locations where land is cheap and they have access to renewable energy, but colocation companies are in the cities, which is where edge networks are.\nHyperscalers rely on colocation providers to lease out both large wholesale facilities and capacity at smaller edge locations, Dinsdale said in his report. Colocation companies such as Equinix, Digital Realty, NTT, CyrusOne, QTS and GDS have remained mostly unaffected by COVID-19.\n\u201cAs the cloud giants look to expand their footprint into ever more countries and regions, they will rely more on data center operators and partners that have a local presence rather than building their own infrastructure,\u201d Dinsdale said via email.\nSynergy data shows growth was strongest in the APAC region, followed by EMEA and North America. Among the 20 largest country markets, China, South Korea, Brazil, Hong Kong, Japan, Germany and India had the highest growth rates. That\u2019s not surprising, since many of those countries have not had the rampant construction of data centers as the U.S., so they are turning to colocation companies.