New Q2 data from Synergy Research Group shows that over the last 24 months, quarterly spend on data center hardware and software has grown by 28%, driven by burgeoning demand for cloud services and increased prices for more fully featured servers. The main beneficiaries have been vendors supplying public cloud infrastructure, who have seen a 54% growth in revenues over the period. Growth for enterprise data center infrastructure has been much lower and spending was actually in slow decline until the recent spike in server demand and pricing gave vendor revenues a boost. Within the enterprise it is private cloud infrastructure that is driving spending with a 45% increase since the second quarter of 2016. In terms of market share, ODMs in aggregate account for the largest portion of the public cloud market, with Dell EMC being the leading individual vendor, followed by Cisco and HPE. The Q2 market leader in private cloud was Dell EMC, followed by Microsoft and HPE. The same three vendors led in the non-cloud data center market, though with a different ranking.

Total data center infrastructure equipment revenues, including both cloud and non-cloud, hardware and software, were $38 billion in the second quarter, with public cloud infrastructure accounting for a third of the total. Private cloud or cloud-enabled infrastructure accounted for over a third of the total. Servers, OS, storage, networking and virtualization software combined accounted for 96% of the Q2 data center infrastructure market, with the balance comprising network security and management software. By segment, Dell EMC is the leader in both server and storage revenues, while Cisco is dominant in the networking segment. Microsoft features heavily in the rankings due to its position in server OS and virtualization applications. Outside of these three, the other leading vendors in the market are HPE, IBM, VMware, Lenovo, Huawei, Inspur, and NetApp.

“We are seeing cloud service revenues continuing to grow by 50% per year, enterprise SaaS revenues growing by over 30%, search/social networking revenues growing by over 25%, and e-commerce revenues growing by over 40%, all of which are driving big increases in spending on public cloud infrastructure,” said John Dinsdale, a chief analyst at Synergy Research Group. “That is not a new phenomenon. But what has been different over the last three quarters is that enterprise spending on data center infrastructure has really jumped, driven primarily by hybrid cloud requirements, increased server functionality and higher component costs.”