What Happens When Hyperscalers And Clouds Buy Most Servers And Storage?
We have a long-standing joke that dates from the early 2000s, when the hyperscalers – there were not yet cloud builders as we now know them – started having hundreds of millions of users and millions of servers and storage arrays to run applications for them at the same time there was the beginnings of consolidation among the OEMs who created the servers and storage used by nearly all enterprises, including dot-com startups.
Here it is: “We used to worry about a world where there might only be five sellers of servers and storage. Now, we worry that there might only be five buyers of servers and storage.”
Just as the coronavirus pandemic kicked in during the first quarter of 2020, according to data from IDC that we have been tracking like a hawk since it was first released in 2021 in its Worldwide Quarterly Enterprise Infrastructure Tracker, service providers – meaning hyperscalers, cloud builders, and other service providers who build datacenter infrastructure and sell capacity on it – as a group surpassed 50 percent share of combined server and storage revenues on Earth. They had accounted for more than half of unit shipments several years earlier, by our estimates.
If the prognosticators at IDC are correct, four years from now as 2028 is coming to a close, the service providers as a group will comprise more than two thirds of server and storage revenues for that year. The latest forecast for 2028, in fact, shows the service providers, who bought $94.5 billion in server and storage equipment in 2023 – up 5.6 percent and giving the SPs a 56.4 percent share – will see their spending rise to $188.5 billion by 2028, giving this prestigious group 69.7 percent share of money spent on this gear. Enterprises, governments, and academic institutions accounted for $73.1 billion in server and storage acquisitions last year, up a much healthier 11.6 percent year on year and giving them a 43.6 percent share of spending. But by 2028, with a compound annual growth rate that is 6.4X as small at 2.3 percent, this EG&A share will fall to 30.3 percent of spending and will only hit $82 billion by 2028.
