Data center capex rises despite COVID-19: Analyst

Dec. 10, 2020
According to Omdia, capex levels among cloud and colocation service providers also should continue to rise, by a 15.7% CAGR from 2020 through 2024.
By STEPHEN HARDY, Lightwave -- Data center services demand continues to power through the pandemic, and data center network operators continue to spend to keep pace, according to a new industry report by Omdia.

The market research firm states in the latest edition of its Cloud & Colocation Data Center Capex Market Tracker that capex levels among cloud and colocation service providers also should continue to rise, by a 15.7% compound annual growth rate (CAGR) from 2020 through 2024 to reach $180 billion in the latter year.

Sustained secular demand for their services, combined with ongoing digital transformation initiatives among enterprises, are expected to keep the wind in capex sails.

"Cloud and colocation service providers have been benefactors of increased SaaS and network customer demand from the pandemic response necessitating remote working and educating,” commented Alan Howard, a principal analyst at Omdia. "Whilst there has been some challenges and delays in data center projects driven by the pandemic, we are not seeing or anticipating a pull-back on investing in the very heartbeat of services delivery, which is the data centers themselves."

“Based on existing evidence and data, the trajectory of data center capex spending will continue to grow to meet anticipated demand,” Howard continued. “Spending in each category is not a smooth flow in each period or each year. For example: IT infrastructure equipment spend is impacted by refresh cycles, trade regulations and supply chain issues; physical infrastructure equipment is also impacted by construction cycles and data center space availability as well as IT equipment deployment timing.”

Despite these potential constraints, the majority of capex is devoted to IT equipment, including servers, storage, networking, and other devices, and physical infrastructure equipment (see chart above). Omdia expects the IT category to account for 71.5% of total capex spend for this year, with physical infrastructure equipment receiving 19.5%. Land and building outlays will round out capex for the year at 9%.

STEPHEN HARDY is Editorial Director/Associate Publisher of CablingInstall's sister publication, Lightwave.

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