Despite 10% spending decline in 2020, the data center market will rebound over the next four years
End-user spending on global data center infrastructure will reach USD 200 billion in 2021, an increase of 6% from 2020, according to the latest forecast from Gartner. Despite a 10.3% decline in data center spending in 2020 due to restricted cash flow during the pandemic, the data center market is still expected to grow year-over-year through 2024.
“The priority for most companies in 2020 is keeping the lights on, so data center growth is generally being pushed back until the market enters the recovery period,” said Naveen Mishra, senior research director at Gartner. “Gartner expects larger enterprise data centers sites to hit pause temporarily and then resume expansion plans later this year or early next. However, hyperscalers will continue with their global expansion plans due to continued investments in public cloud.”
Lockdowns from COVID-19 will prevent more than 60% of planned new facilities construction in 2020, which is why data center infrastructure revenue will decline 10.3% in 2020 (See Table). End-user spending is expected to grow in the single digits starting in 2021.
Table: Worldwide Data Center Infrastructure End-User Spending (Billions of U.S. Dollars)
Source: Gartner (October 2020)
“Much of the reduced demand in 2020 is expected to return in 2021 when staff can physically be onsite,” said Mishra. “For now, all data center infrastructure segments will be subject to cost containment measures and enterprise buyers are expected to extend life cycles of installed equipment.”
Three Actions to Recover Data Center Infrastructure Opportunities
With slow improvement in economic growth, data center infrastructure general managers should seek to prioritize a select set of existing and new customers. Specifically, Gartner recommends:
- Training the organization’s sales force to engage with the chief financial officer (CFO) and chief procurement officer on a set of cost optimization initiatives such as renegotiating IT contracts, optimizing cloud costs, and consolidating IT.
- Crafting an industry playbook that helps technology providers understand COVID-19’s impact on a range of different industries to then recommend short- to midterm action items for the given providers by each industry.
- Investing in a new go-to-market model for digital natives to drive innovation. Build momentum around hybrid IT and consumption-based pricing to improve mind share with digital natives.