Despite the disruption in demand for data center equipment caused by the COVID-19 pandemic this year, data center capital expenditure (capex) will grow at a 6% CAGR to reach just over $200 billion over the next five years.
A report by Dell'Oro Group said data center capex “growth is forecast to be mixed depending on the customer segment”, which includes capex for servers and other data center infrastructure equipment.
The cloud, which accounts for more than 60% of the worldwide data center capex, will continue to gain momentum when compared to enterprise/on-premise data center deployments.
Telco edge data centers could emerge over the long-term as telcos build their edge compute services and applications.
The coronavirus pandemic has hit several industry verticals hard over the past five months, including brick-and-mortar retail, travel, hospitality and small-to-medium sized business, which led to them pull-back in IT spending this year as they wait for the business climate to stabilize.
On the flip side, COVID-19 has led to some organizations accelerating their digital transformations, which includes putting data, workloads and applications in the cloud. Dell'Oro's report said that as enterprises look to conserve capital spending, the public cloud, which has a flexible and consumption-based infrastructure, could help meet the growing demand for remote work and distance learning.
"The COVID-19 pandemic and the ensuing recession may have the long-lasting effect of accelerating the permanent migration of certain industries and workloads to the cloud," according to Dell'Oro.
Dell'Oro said the top-four U.S. cloud service providers—Amazon, Facebook, Google, and Microsoft—are positioned to continue their momentum of expansion over the next five years.
"Servers will continue to be consolidated in fewer mega cloud data centers that could potentially provide greater capacity than the same number of servers spread out across thousands of enterprise data centers," according to Dell'Oro Group.
Dell'Oro Group also said the Intel server processor refresh cycles have historically influenced IT spending.
"While the major cloud service providers typically ramp server capacity outside of the processor refresh cycle, the upcoming Intel 10 nm Whitley server platform refresh due later this year could generate an uplift on server spending. Viable alternatives to Intel processors, AMD EPYC and ARM, for server and storage system applications are starting to materialize in certain markets," according to Dell'Oro Group.
In the report, Dell'Oro Group cited open source groups coming together to share and standardize best practices in the design of sustainable data center infrastructure as a factor going forward.
"The Open Compute Project (OCP), in particular, has introduced various technological innovations in the areas of server and server connectivity, rack architecture, and networking switches, which could shape the future development of data center infrastructure," Dell'Oro Group said.