Cloud and colocation data center capex to hit $125B by 2023-report

While there is still some uncertainty in regards to how the COVID-19 crisis will play out, data center capital spending by cloud and collocation providers will hit $125 billion by 2023 after reaching $82 billion last year, according to Omdia.

Data center capex is projected to grow at a 9.8% compound annual growth rate (cagr) from last year through 2023 as service providers invest more capex to keep up with increasing demand from their customers.

Vendors such as Arista Networks, Cisco, Juniper Networks, among others, stand to gain from the increased spending by the cloud and colocation service providers.

“Data-center capex tends to ebb and flow over time as service providers construct new data-center capacity and then absorb the new capacity based on demand,” said Omdia’s Alan Howard, principal analyst, colocation and cloud services, in a statement. “Last year represented a major phase of data-center construction among the largest cloud and colocation service providers, as revealed by Omdia’s detailed forecast numbers for capex by category.

“Physical infrastructure spending in 2019 increased by 9.9% over 2018, outpacing IT infrastructure, which was up 1.7%. However, the pendulum is swinging the other way in 2020 with IT infrastructure growing by 12.3% and physical infrastructure rising by 8.4% compared to 2019.”

Omdia said it was too early to gauge the impact of the coronavirus pandemic for the cloud and colocation markets, as well as data center capex, but it has “the potential for far-reaching economic impacts globally.”

“Short-term implications remain to be assessed as it could take some time for coronavirus’ economic impacts to play-out in this sector,” according to Omdia’s press release. “There are reports of service providers instituting policies to minimize foot traffic in data centers and postponing non-essential projects. There is also the possibility of customers delaying deployments. Based on continuing non-secular trends and current market momentum, the longer-term prospects for continued growth should remain intact.”

Omdia said variations in its capex categories was being driven by deployment timing. IT infrastructure spending—which includes servers, networks and storage equipment—was down 7% half-over-half (HoH) from the second half of 2018, and up 6% year-over-year (YoY) from the first half of 2018. Physical infrastructure—including uninterruptable power supplies, power distribution units and cooling equipment—was down 11% HoH and up 12% YoY.

IT infrastructure is projected to grow at a five-year cagr of 10% from 2018 through 2025 while physical infrastructure increase of 8.5%. Land and building capex were down 10% HoH, and up 13 %YoY.

While Facebook eased off of the capex gas pedal a bit last year, Google, Microsoft, Amazon and Alibaba accounted for 44% of total provider data-center capex spending of $17.2 billion in the first half of last year, compared to total capex for the period of $39 billion

Omdia is also tracking how cloud providers invest their capex. In the first half of 2019, IT infrastructure made up 80% of capex spend, while physical infrastructure—along with land and building—capex made up the remaining 20%.

This article was written by Mike Robuck from FierceTelecom and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.