Service Providers Account for Growing Share of ICT Spending, Led by Surge of Cloud Infrastructure Spending, According to New IDC Black Book Service Provider Edition

FRAMINGHAM, Mass.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/ICTspending?src=hash” target=”_blank”gt;#ICTspendinglt;/agt;–Information and communications technology (ICT) spending by service
providers will reach $426 billion by 2022, representing average growth
of 6% per year, as the ongoing shift from on-premise IT management to
the “as-a-service” model continues to gather pace in many regions around
the world. Cloud and digital service providers will represent the
strongest market opportunities for ICT vendors with overall growth of 9%
over the forecast period ($105 billion in annual spend by 2022), but
communications service providers will still represent the largest share
of service provider spending ($254 billion in 2022). Colocation and
managed services providers will increase spending by an average of 7%
per year, reaching $67 billion in annual ICT spend by 2022. The ICT
spending forecast was published in the first Worldwide
Black Book Service Provider Edition
from International Data
Corporation (IDC).

Service providers already account for 44% of worldwide spending on core
infrastructure technologies (server and storage hardware, enterprise
network equipment, and storage/network software). The pace of
investments by cloud infrastructure providers is expected to slow in the
next few years as supply/demand and supply chains normalize, but service
providers will continue to account for a growing share of overall
spending as the ICT market shifts to the “as-a-service” model and new
digital ecosystems emerge in which digital service providers will play a
key role.

“The shift from end-users to service providers in core infrastructure
technology markets is a profound shift with deep implications for tech
vendors,” said Stephen
Minton
, vice president in IDC’s Customer
Insights & Analysis
group. “Cloud infrastructure providers, in
particular, have led a surge of spending on servers, storage, and system
infrastructure software in the past few years. While this will slow over
the long term, we expect new digital service providers to pick up the
slack in terms of overall ICT spending as new digital ecosystems are
created to serve an increasingly digital global economy. For IT vendors,
this has major implications in terms of a major shift of spending from
end-users to middlemen.”

Last year saw a major spending cycle by cloud and digital providers who
increased their share of worldwide spending on core infrastructure
technologies from 24% to 28% (from $39 billion to $51 billion). Spending
on core infrastructure by cloud and digital service providers will
increase at an average rate of 10% per year over the next five years
compared to growth of 3% by commercial end-users.

This shift has been particularly rapid in the United States where cloud
and digital providers already account for 43% of core infrastructure
spending and will make up 47% by 2022 with an average growth rate of
8.5% compared to meagre growth of 1% by commercial end-users. Cloud and
digital providers account for a smaller share in China (around 25% in
2018) but will increase spending on core infrastructure by 22% over the
forecast period. In Western Europe, cloud and digital providers make up
only 12% of core infrastructure spend and this will barely change over
the forecast period despite growth of around 6% per year on average.
This is largely because a major capital spending cycle in 2018 will be
followed by much weaker increases over the next few years as service
providers in Western Europe take stock and balance their capital
spending needs with end-user demand for services in a more scalable
manner amidst a cautious economic outlook.

“There is significant variation by region in service provider spending
and growth,” said Minton. “For example, cloud and digital providers
still represent a relatively small share of spending in the Europe,
Middle East and Africa (EMEA) region where they will account for just
11% of core infrastructure spending by 2022; or Canada, where they will
make up just 9%. In the U.S., by contrast, cloud and digital providers
will represent almost half of all spending on core infrastructure
technology by the same year as a result of the phenomenal growth of
cloud providers in the U.S. market, which are serving aggressive early
adopters of cloud infrastructure and software as a service.”

“The implications for ICT vendors are profound,” said Minton. “Not only
are their traditional customers moving away to a new model for ICT
resource procurement but they are faced with an increasing share of
revenue concentrated in a relatively small number of customers. Of
course, many ICT vendors are chasing the service provider trend by
transforming their own business models accordingly, positioning
themselves as service providers with offerings in the cloud space in
particular. However, for many of these firms, revenue from these new
business opportunities still represents a relatively small share of
overall sales, leading to a bumpy transition. Meanwhile, we expect new
digital service providers to add significant disruption to the overall
market in the next ten years as the global economy shifts into an
‘as-a-service’ model for B2C transactions in particular.”

IDC’s Worldwide
Black Book: Service Provider Edition
provides a view of ICT spending
by Service Providers (Cloud and Digital, Colocation and Managed
Services, Communications Services) in comparison with end-user customers
(Commercial and Consumer). It covers market sizing and forecasts for all
traditional ICT spending, including infrastructure, devices, software,
IT services, business services and telecom services. The forecast period
covers 2017-2022, and all data is presented in constant currency at
average annual exchange rate (Value Constant Annual).

About IDC
International Data Corporation (IDC) is the
premier global provider of market intelligence, advisory services, and
events for the information technology, telecommunications, and consumer
technology markets. With more than 1,100 analysts worldwide, IDC offers
global, regional, and local expertise on technology and industry
opportunities and trends in over 110 countries. IDC’s analysis and
insight helps IT professionals, business executives, and the investment
community to make fact-based technology decisions and to achieve their
key business objectives. Founded in 1964, IDC is a wholly-owned
subsidiary of International Data Group (IDG),
the world’s leading media, data and marketing services company that
activates and engages the most influential technology buyers. To learn
more about IDC, please visit www.idc.com.
Follow IDC on Twitter at @IDC
and LinkedIn.

Contacts

Stephen Minton
sminton@idc.com
+44
7435 753922

Michael Shirer
press@idc.com
508-935-4200

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