In 2017, local data centers accounted for nearly 60% of capacity. By 2027, Synergy Research is projecting that number will be reduced by half, but that data is not complete. New research from Synergy finds that on-premises data center growth is actually holding up, but over the next five years, growth will remain essentially flat. At the same time, hyperscale data centers operated by the largest cloud companies will continue to grow at a considerable pace.
It's not exactly a death knell for on-premises, but capacity is clearly moving to the cloud. Today, Synergy reports that there are 900 hyperscale data centers around the world, and that number is split fairly evenly between facilities owned by cloud providers and those that are leased. On premise, local, owned, still represents 40% of usage.
Synergy predicts that in five years, cloud providers will control more than half of all capacity and the on-premises number will drop to 30%. People have been predicting for years that most enterprise workloads would eventually move to the cloud, but like many technological changes, the shift has happened more slowly than those in the industry thought.
In 2019 at AWS re:Invent, then-AWS CEO Andy Jassy expressed impatience with the rate of change. He clearly wanted people to start moving to the cloud faster, and his keynote was peppered with advice on how to do so.
“It's easy to spend a lot of time dipping your toe in the water if you don't have an aggressive target,” Jassy said at the time, and perhaps this new data and the trend line predictions Synergy is making show that we could finally be reaching a tipping point in the cloud.
However, for AWS, it may not be growing the way Jassy expected. While growth has slowed quite dramatically overall for the cloud infrastructure market, it has plummeted for AWS in particular, hitting the teens in your most recent report compared to a 37% growth in last year. In terms of market share, that translated to 32% for AWS, which is still the clear leader, but Microsoft has continued to rise with 23% in the last quarter. Google came in third with 10%.
Those numbers may paint a confusing picture, but despite the short-term slowdown we're seeing, Synergy believes that as the economy begins to stabilize, the move to the cloud will only accelerate and that will translate into less hub capacity. on-premise data in the not-too-distant future.
Synergy's spending figures tell a clearer story: “Ten years ago, enterprises were spending more than $80 billion per year on IT hardware and software for their own data centers, while they spent less than $10 billion on services.” of nascent cloud infrastructure. Fast forward to today and spending on data center hardware and software has only grown by an average of 2% per year, while spending on cloud services has skyrocketed, growing by an average of 42%. per year to reach $227 billion in 2022.”
All of that means that while on-premises data centers aren't going away anytime soon, they are starting to decline as a percentage of IT spending and data center capacity, and that trend seems unstoppable.
