Data centres and cloud
23 July 2019 | Laurence Doe
Hyperscale operator capex in Q1 of 2019 has dipped in comparison to the record levels seen throughout 2018, according to Synergy Research Group, which has also found that there is a clear market leader in the APAC region for cloud providers.
A report by the group on hyperscale operator capex has found it totalled just over $26 billion in the first quarter of this year. Last year’s first quarter was boosted by Google’s $2.4 billion purchase of Manhattan real estate, but, excluding that acquisition (shown in the graph below), the Q1 capex is down by 2% from the same period in 2018.
Synergy’s latest cloud market report also found that China is featuring strongly in the ranking of leading cloud providers in the APAC region. While Amazon maintains its number one position in the region, three of the top six are Chinese companies. Alibaba, Tencent and Sinnet have claimed the top spots in the regional leadership table while Baidu lies just outside the top six. Chinese cloud providers now have a 40% share of the APAC public cloud market.
Hyperscale and telco big spenders
The top five hyperscale companies spending in Q1 were Amazon, Google, Facebook, Microsoft and Apple. Outside of the top five, other leading hyperscale spenders include Alibaba, Tencent, IBM, JD.com and Baidu. Much of the hyperscale capex goes towards building, expanding and equipping huge data centers, which have now grown in number to 458. Synergy has predicted that this number will rise to 500 in 2020.
Though Q1 capex was down a little from 2018, it was still up 56% from Q1 of 2017 and up 81% from 2016. The Q1 capex growth rates of nine out of the twenty hyperscale operators was in the double-digits year on year. Synergy is expecting to see overall capex levels bounce back over the remainder of 2019.
Hyperscale operator capex reached over $32 billion in Q4, 2018, according to the group, which surpasses each of the record-breaking first three quarters of the year. Full-year hyperscale capex jumped 43% to almost $120 billion. Telco capex was over double that of hyperscale operators, but notably telco spending remained at the same level as the previous two years.
The top five hyperscale spenders in 2018 were Google, Amazon, Microsoft, Facebook and Apple. Coincidentally their aggregate 2018 capex was almost identical to the capex of the top five telco spenders – China Mobile, AT&T, Verizon, NTT and Deutsche Telekom.
Synergy Research Group’s data (top image) is based on analysis of the capex and data center footprint of 20 of the world’s major cloud and internet service firms. The top five spenders of Q1 2019 were Amazon, Google, Facebook, Microsoft and Apple. Other leading hyperscale spenders include Alibaba, Tencent, IBM, JD.com and Baidu. Hyperscale capex was primarily spent on the 458 data centres that are operating worldwide.
China’s cloud dominance grows
In Q1 of 2019, public infrastructure as a service (IaaS) and platform as a service (PaaS) are the most prominent segments of the cloud infrastructure services market and account for the bulk of the
revenues, with the balance coming from managed or hosted private cloud services.
Synergy has also found that although APAC does not yet account for a third of the worldwide public cloud market, it is growing much more rapidly than either the North American or EMEA regional markets. The world’s largest cloud providers, who are all US-headquartered firms, may be challenged by Chinese cloud providers, which are benefitting from the huge growth in their local cloud market. Synergy has found that language, cultural and business barriers will cause some of those Chinese companies to remain tightly focused on their home market.
Public cloud makes largest gains
The global spend on data centre hardware and software increased by 17% in 2018, according to Synergy. Data centre infrastructure equipment revenues, including cloud and non-cloud, hardware and software, were $150 billion in 2018 – with public cloud infrastructure accounting for over a third of the total.
Private cloud or cloud-enabled infrastructure represented just over a third of the total. The growth was driven by growing demand for public cloud services as well as the requirement for richer server configurations, which drove up the average enterprise server price. Public cloud infrastructure spending grew by 30%.
Enterprise data centre infrastructure spending increased by 13%, which was impacted by a small decline in traditional, non-cloud infrastructure and a 23% growth in private cloud or cloud-enabled infrastructure. Servers, OS, storage, networking and virtualisation software combined accounted for 96% of the data centre infrastructure market, with the balance comprising network security and management software.
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