Coronavirus outbreak could accelerate enterprise adoption of cloud services
The global server and storage markets will take a hit from the coronavirus pandemic this year as enterprises, many of which are temporarily closing their doors, slow their IT spending, according to IDC analysts.
The Lowdown: However, enterprises that are seeing a disruption in business due to the COVID-19 outbreak could speed up their migration to the public cloud, the analysts said.
The Details: In its report late this month, IDC created three forecasts – optimistic, probable, and pessimistic – for the impact of the coronavirus on IT infrastructure markets. The most likely scenario is a broad negative impact that starts in China and then spreads into other regions before it slows toward the end of the year, though the analysts warned that the forecast could shift as the COVID-19 situation evolves.
The impacts will differ depending on time and industries:
> Regions: China, as the place where the coronavirus outbreak began, will be greatly impact in the first quarter, while other regions will see the repercussions in Q2.
> Industries: Verticals like hospitality, retail, and transportation are seeing significantly less consumer demand while vendors in such areas as web and videoconferencing, video streaming, and online retail will see a boost in demand as more employees work from home.
> Cloud services: With the interruption in business, enterprises are considering an accelerated adoption of cloud services, with providers seeing a spike in demand.
The result will be a decrease in enterprises buying IT infrastructure and growing their demand for cloud services. For the server space, the result will be a moderate decline this year of 3.4%, but because enterprises buy a higher percentage of external storage systems, the decline will be a sharper 5.5%.
The Impact: There already has been an ongoing shift in spending toward the cloud. According to Synergy Research Group, in 2019, spending on public cloud software and hardware grew 7%, while spending on traditional data centers and private clouds fell 1%. However, public cloud data centers account for 37% of overall data center software and hardware spending, though that number is rising quickly.
In addition, Synergy found that in the fourth quarter of 2019, hyperscalers like Google and Microsoft spent a record $32 billion on their data centers, with spending for the entire year up 11%.
Background: The COVID-19 outbreak that has led to more than 735,000 confirmed cases and almost 35,000 deaths worldwide, also is roiling global stock markets, forcing companies to have many employees working remotely while laying off or furloughing others.
The Buzz: “The impact of COVID-19 will certainly dampen overall spending on IT infrastructure as companies temporarily shut down and employees are laid off or furloughed,” said Kuba Stolarski, research director of IT infrastructure at IDC. “While IDC believes that the short-term impact will be significant, unless the crisis spirals further out of control, it is likely that this will not impact the markets past 2021, at which point we will see a robust recovery with cloud platforms very much leading the way.”
“The IT infrastructure markets are already going though a transformation, and shifts in end user spending will bring an even faster changing IT buyer landscape,” said Natalya Yezhkova, research vice president of IT infrastructure at IDC. “While the current crisis brings tensions and uncertainty to the market, it also will push organizations to expedite adoption of technologies and IT delivery models that help with optimization of IT infrastructure resources.”