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Server market and ESS revenues slump as COVID-19 spreads - IDC

30 Mar 2020

End-user spending on IT infrastructure (server and enterprise storage systems) will decline in 2020 as a result of the COVID-19 pandemic, according to the International Data Corporation (IDC).

IDC data from its Worldwide Quarterly Server Tracker predicts that under the current probable scenario, server market revenues will decline 3.4% year over year to USD$88.6 billion.

The server market is expected to decline by 11.0% in Q1 and 8.9% in Q2 and then return to growth in the second half of the year.

Insights from another source, the Worldwide Quarterly Enterprise Storage Systems Tracker, indicates external enterprise storage systems (ESS) revenues will also decline by 5.5% to $28.7 billion in 2020. 

The external ESS market is forecast to decline by 7.3% in Q1 and 12.4% in Q2 before returning to slight growth by the end of 2020 with further recovery expected in 2021, according to IDC.

The probable scenario assumes a broad negative impact on IT infrastructure markets starting in China and spreading into other regions before slowing toward the end of the year. 

Elements of the impact include changing demand expectations from various groups of IT buyers, supply chain shortages and logistical delays, short-term component price increases, and a suppressed economic and social climate. 

As the first to be hit by the coronavirus, China will see the greatest negative impact in the first quarter of 2020, while other regions will start to experience the impact in the second quarter. 

Facing economic uncertainty, many businesses are being forced to consider more expedited adoption of cloud services to fulfil their compute and storage needs. 

This spike in demand puts unplanned pressure on the IT infrastructure in cloud service provider data centres, leading to a growing demand for servers and system components. 

As a result, the IT Infrastructure market has two submarkets going in different directions: decreasing demand from enterprise buyers and increasing demand from cloud service providers. 

This dynamic is impacting the server market the most, resulting in just a moderate decline in the overall market in 2020. 

The external storage systems market, with a higher share of enterprise buyers, will experience a deeper decline in 2020.

"The impact of COVID-19 will certainly dampen overall spending on IT infrastructure as companies temporarily shut down and employees are laid off or furloughed," says IDC research director of IT infrastructure Kuba Stolarski.

"While IDC believes that the short-term impact will be significant, unless the crisis spirals further out of control, it is likely that this will not impact the markets past 2021, at which point we will see a robust recovery with cloud platforms very much leading the way."

CDC says in the longer term both markets will return to growth. The server market is expected to deliver a compound annual growth rate (CAGR) of 4.9% over the 2019-2024 forecast period with revenues reaching $116.6 billion in 2024. Meanwhile, the external ESS market will see a five-year CAGR of 1.3% growing to $32.4 billion in 2024.

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