Why Data Center Spending Will Hit $200B In 2021: Gartner

‘Much of the reduced demand in 2020 is expected to return in 2021 when staff can physically be onsite,’ says Naveen Mishra, Gartner’s senior research director.

Despite dismal data center infrastructure spending this year due to the coronavirus pandemic and subsequent restricted cash flows, IT research firm Gartner expects a huge rebound starting in 2021.

End-user spending on global data center infrastructure is projected to climb to $200 billion in 2021, up 6 percent from 2020, according to the latest forecast from Gartner. This year, worldwide data center spending is projected to reach only $188 billion, down 10.3 percent year over year.

“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. “Much of the reduced demand in 2020 is expected to return in 2021 when staff can physically be onsite. 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.”

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Global lockdowns from COVID-19 will prevent more than 60 percent of planned new facilities construction in 2020, according to Gartner.

However, Gartner expects larger enterprise data center sites that have “hit pause temporarily” to resume expansion plans later this year or in early 2021, Mishra said. Gartner says the data center infrastructure market will grow year over year through 2024.

It is key to note that giant public cloud providers like AWS, Microsoft and Google are continuing to spend billions on data center hardware and software in 2020 with no major spending disruptions due to COVID-19.

“Hyperscalers will continue with their global expansion plans due to continued investments in public cloud,” said Mishra.

Spending on public cloud data center infrastructure jumped 25 percent year over year to nearly $17 billion in the second quarter of 2020, hitting an all-time high, according to Synergy Research Group. Although enterprises are slowing down their investment in data centers amidst the coronavirus pandemic, cloud providers are shrugging off the impact of the pandemic and are continuing to invest heavily in their data centers.

The total number of large data centers operated by hyperscale cloud providers jumped to 541 at the end of the second quarter of 2020, according to Synergy Research Group. AWS and Google opened the most new data centers in the last 12 months, accounting for over half of the total, followed by Microsoft and Oracle.

Gartner suggests that with slow improvement in economic growth, data center infrastructure general managers should prioritize a select set of existing and new customers. The research firm suggests training sales forces to engage with customer’s chief financial officers and chief procurement officers to create cost optimization initiatives like consolidating IT and optimizing cloud costs.

Additionally, Gartner says data center managers should invest in new go-to-market models for digital natives to drive innovation as well as build more momentum around hybrid IT and consumption-based pricing for customers.