Market research and analysis firm Omdia (formed by a merger of assets between Informa and IHS Markit; see “IHS Markit swaps group that researches optical communications for Informa’s agribusiness unit”) expects capex spending by cloud and colocation providers to reach $125 billion by 2023. This would represent a 9.8% compound annual growth rate (CAGR) from 2019, when worldwide capex came in at $82 billion, Omdia states in its newly available Cloud and Colocation Data Center Capex Market Tracker.
Within overall capex growth Omdia expects IT infrastructure spending (which includes servers, networks, and storage equipment) to grow at a five-year CAGR of 9.9% from 2018 through 2025, physical infrastructure investments (which encompass uninterruptable power supplies, power distribution units, and cooling equipment) to rise at an 8.5% CAGR, and other land and building expenditures to increase by 12.7%.
Omdia analysts note that while capex levels declined 8% in the first half of last year versus the previous six months, that spending level was still 8% greater than the first six months of 2018. “Data center capex tends to ebb and flow over time as service providers construct new data-center capacity and then absorb the new capacity based on demand,” said Alan Howard, principal analyst, colocation and cloud services, at Omdia. “Last year represented a major phase of data-center construction among the largest cloud and colocation service providers, as revealed by Omdia’s detailed forecast numbers for capex by category. Physical infrastructure spending in 2019 increased by 9.9% over 2018, outpacing IT infrastructure, which was up 1.7%. However, the pendulum is swinging the other way in 2020 with IT infrastructure growing by 12.3% and physical infrastructure rising by 8.4% compared to 2019.”
Omdia analysts caution that there is still not enough data to adjust expectations due to the effects of the coronavirus pandemic. However, despite potential short-term drags on spending, continuing non-secular trends and current market momentum suggest that longer-term prospects for continued capex growth should remain in place.
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