Data Center Systems Spending Growth Shrinking Fast, Will Fall In 2020: Gartner

Global IT spending growth is starting to slow, with data center systems spending actually expected to fall in 2020, according to market research firm Gartner.

Gartner said on Monday that it expects overall IT spending to grow in 2019 by 3.2 percent to reach $3.77 trillion, with growth in 2020 to fall slightly to 2.8 percent to reach $3.88 trillion. Gartner estimated 2018 spending grew 3.9 percent over 2017.

However, the Stamford, Conn.-based firm reported, data center systems spending, which it estimated rose 11.3 percent in 2018 over 2017, will grow only 4.2 percent in 2019 and will actually shrink 3.9 percent in 2020.

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The 15-percent swing in data center systems growth from a positive 11.3 percent in 2018 to a negative 3.9 percent in 2020 is not a surprise, said John Woodall, vice president of engineering at Integrated Archive Systems, a Palo Alto, Calif.-based solution provider.

There is a lot of variability going on with clients in terms of their data center spending as they look at how quickly to shift spending to the cloud, Woodall told CRN.

The high growth seen in data center systems spending in 2018 stemmed in large part from a stalling in cloud migration, he said.

"Customers were not able to move to the cloud as fast as expected," he said. "I'm not sure I see the drop for us at this point. Our pipelines are doing well. But there's no reason to doubt the Gartner trends. We're seeing an inevitable shift to more cloud-native deployments impacting data center spending."

The wild card in data center IT spending is just how quickly customers shift data center workloads to the cloud, Woodall said.

"That’s the trend," he said. "Cloud brings customers agility, speed, and scale, and a quick time to value. And that has a certain offset to the cost of moving to the cloud."

The movement of data center workloads to the cloud is inevitable, Woodall said.

"As the Borg says, 'resistance is futile,'" he said. "It's a dynamic market. It's fun. And it's risky. We're agile, and we adjust our plans accordingly."

For solution providers, there's no avoiding the impact from the slowing in data center spending, but that doesn't mean bad news for the channel, Woodall said.

"Of course there will be impact," he said. "Our business is to help customers solve problems and drive business outcomes. This has traditionally been done on premises. For us to move forward, we have to be involved in a multi-cloud world. And all of our competitors are doing the same."

Gartner, in its global IT spending report, also said it expects spending enterprise software, IT services, and communications services to soften between 2018 and 2020, although at nowhere near the rate expected for data center systems growth.

Spending on devices is the only category expected to see increased spending growth between 2018 and 2020.

Gartner expects data center systems spending between 2018 and 2020 to remain flat at $202 billion. Enterprise software spending is expected to rise from $397 billion to $466 billion. Device spending is expected to rise from $669 billion to $689 billion. IT services spending is expected to rise from $983 billion to $1.08 billion. And Communications Services is expected to rise from $1.40 billion to $1.44 billion.

John-David Lovelock, research vice president at Gartner, said in a statement that 2019 IT spending will see growth despite uncertainty from recession rumors, Brexit, and trade wars and tariffs.

"However, there are a lot of dynamic changes happening in regards to which segments will be driving growth in the future. Spending is moving from saturated segments such as mobile phones, PCs and on-premises data center infrastructure to cloud services and Internet of Things (IoT) devices. IoT devices, in particular, are starting to pick up the slack from devices. Where the devices segment is saturated, IoT is not," Lovelock said.