Compute and storage cloud infrastructure spending grows as prices soar in Q1 2023 - IDC

Spending went up 14.9 per cent reaching $21.5bn

Spending on compute and storage infrastructure products for cloud deployments, including dedicated and shared IT environments, increased 14.9 per cent year over year in the first quarter of 2023 to $21.5bn (£17bn), IDC found.

Spending on cloud infrastructure continued to outpace the non-cloud segment with the latter declining 0.9 per cent in Q1 to $13.8bn (£10.85bn).

IDC reports the cloud infrastructure segment saw unit demand down 11.4 per cent, but average selling prices (ASPs) grew 29.7 per cent, driven by inflationary pressure as well as a higher concentration of GPU-accelerated systems being deployed by cloud service providers.

Spending on shared cloud infrastructure reached $15.7bn (£12.54bn) in the quarter, increasing 22.5 per cent compared to a year ago.

IDC expects to see continuous strong demand for shared cloud infrastructure, which is expected to surpass non-cloud infrastructure in spending in 2023.

The dedicated cloud infrastructure segment declined 1.5 per cent year over year in Q1 to $5.8bn (£4.56bn).

Of the total dedicated cloud infrastructure, 44.5 per cent was deployed on customer premises during the quarter.

The news comes just as IDC reported earlier this year of a slowing downward trend in IT spending while security and IoT spending continues to grow.

Forward-looking

For 2023, IDC forecasts cloud infrastructure spending to grow 7.3 per cent compared to 2022 to $96.4bn (£75.77bn) - a slight improvement from the prior outlook for the year of 6.9 per cent.

Non-cloud infrastructure is expected to decline 6.3 per cent to $60.4bn (£47.47bn).

Shared cloud infrastructure is expected to grow 8.4 per cent year over year to $68.0bn (£53.45bn) for the full year, while spending on dedicated cloud infrastructure is expected to grow 4.8 per cent to $28.4bn (£22.32bn) for the full year.

The subdued growth forecast reflects the expectation that the market will face significant macroeconomic headwinds and curbed demand with cloud staying positive due to the drive for modernisation, opex focus, and continued growth in digital consumer services demand, while non-cloud contracts as enterprise customers shift towards capital preservation.

"Cloud infrastructure spending remains resilient in the face of macroeconomic challenges," said Kuba Stolarski, research vice president for IDC's infrastructure systems, platforms, and technologies group.

"However, the segment is grappling with substantial price hikes and Q1 marked the second consecutive quarter of declining system unit demand.

"Although the overall outlook for the year remains positive, its growth hinges on the expectation that volume will drive it.

"Prolonged stagnation in demand could pose a significant obstacle to growth for the remainder of this year."