“Unusual' growth in public cloud infrastructure market - here's why

New data from Synergy Research Group has revealed public cloud provider spending on data center infrastructure hardware and software continues its relentless surge.

In fact, spending grew a whopping 32 percent from the first quarter of 2017 after an unusually vigorous start to the year – the highest growth figure seen in nine quarters.

Synergy Research Group affirms the first quarter of the year typically sees a sharp drop off after a seasonally strong fourth quarter – normally coming in the 10-20 percent range – but spending was only down 2 percent from 2017's fourth quarter.

Last year's third quarter saw total public cloud infrastructure revenues (including hardware and software) exceed the US$10 billion per quarter milestone, with that figure now comfortably over $11 billion.

95 percent of 2018's first quarter market was made up of servers, operating systems, storage, networking and virtualization software, with the balance comprising cloud security and cloud management.

When it comes to vendor share, the market continues to be dominated by original design manufacturers (ODMs) with the group in aggregate now accounting for almost 30 percent of total revenues. Dell EMC, Cisco, and HPE come next with around 5-10 percent market share each. The next highest ranked vendors in Q1 were Microsoft, Huawei, and VMware.

This ongoing trend of the ODM rise can be put down to many of the largest public cloud providers snubbing the big manufacturers in favour for cheaper suppliers that can provide the data center infrastructure they require to their precise specifications.

"As we saw in our analysis of Q1 hyperscale capex, the hyperscale operators are on a spending spree and continue to crank up their investment in data centers, with much of this spending flowing through to the vendors of data center hardware and software," says Synergy Research Group chief analyst and research director John Dinsdale.

"Hyperscale operators totally dominate the cloud market, so their ongoing growth bodes well for hardware and software vendors – though ODMs continue to aggressively increase their share of the pie. Our forecasts show that IaaS, PaaS, SaaS and public cloud workloads generally are all going to continue to grow rapidly over the next five years, which will continue to drive ever-increasing levels of spending on data center infrastructure.

Breaking it down by market segment show ODMs dominating server and storage hardware shipments with Dell EMC, HPE, and Cisco following behind at a distance. However, Cisco is maintaining a clear lead in the networking market despite Arista's continued strong growth. Microsoft and VMware are leaders in the infrastructure software segments.