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Gartner Sees Data Center Market Rebounding Over Next Four Years

October 23, 2020

End-user spending on global data center infrastructure is projected to reach $200 billion in 2021, an increase of 6% from 2020, according to the latest forecast from Gartner, Inc. 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 1). End-user spending is expected to grow in the single digits starting in 2021.

Opengear’s VP of Marketing, Steve Cummins added, "The rising adoption of IoT and other data-rich innovations present massive opportunities for growth across the entire data center market. And this trend will only intensify as the need for near-zero latency on increasingly robust, geographically dispersed networks goes up, alongside demand for smaller edge infrastructure to handle the traffic and support 5G.

As organizations introduce more new devices and push closer to the edge, networks are also becoming increasingly complex. Legacy solutions are no longer adequate, and so more companies are investing in best-of-breed network resilience tools to support their needs for today and tomorrow. For example, out-of-band management is evolving from a simple remote access solution, to a secure, independent management network capable of running NetOps automation routines. This increases staffing efficiency and reduces the need for engineers to travel to remote locations, which is particularly important during the pandemic.”

Table 1. Worldwide Data Center Infrastructure End-User Spending (Billions of U.S. Dollars)

 

2019

2020

2021

End-User Spending ($B)

210

188

200

Growth (%)

0.7

-10.3

6.2

Source: Gartner (October 2020)

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

  1. 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.
  2. 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.
  3. 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.

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