Synergy Research: Growth in Hyperscale and Enterprise IT Infrastructure Spending; Telcos Remain in the Doldrums

Hyperscale cloud companies are spending more and more money on Capex IT infrastructure compared with the largest telecommunication companies as overall IT infrastructure spending in 2022 reached $700 billion.  In 2022, hyperscale operators spent roughly $200 billion on Capex IT infrastructure such as network switches and data center hardware and software, representing a 9 percent increase annually and led by Amazon, Google and Microsoft, according to new data from IT market research firm Synergy Research Group.

Comparatively, telecom spending on IT infrastructure by companies like Verizon, AT&T and China Mobile dropped 4 percent in 2022 to approximately $290 billion, Synergy Research Group reported.

Hyperscale operator share of total spending has continued to rise steadily over the last few years, as continued growth in cloud and other digital services drive ever-higher spending levels. Telco spending remains heavily crimped by lack of meaningful growth in their revenue streams. Enterprise spending has also bounced back in the last two years after a soft spell in 2019 and 2020. The main drivers in the enterprise have been the continued long-term growth of hosted and cloud collaboration solutions, increased spending on network security, and a post-pandemic bounce back for both enterprise data centers and switches. In some segments, higher ASPs have also contributed, as cost increases due to supply chain issues are passed on to the customers of tech vendors.

Telcos remain locked in a low-to-no-growth world and their Capex reflects that. For hyperscale operators, the boom in cloud services and continued growth in other digital services is driving ongoing growth in spending.  Telecom companies’ share of Capex IT infrastructure spending was 42 percent in 2022, down from 58 percent share in 2016.  The largest telco spenders on technology infrastructure last year were China Mobile, Deutsche Telekom, Verizon, AT&T, NTT and China Telecom.

In 2022, hyperscale operators accounted for 29 percent share of the total Capex infrastructure spending market, up significantly from 13 percent share in 2016.  Some of the biggest spenders in 2022 were Amazon, Apple, Google, Microsoft and Alibaba.

Overall spending by  both fixed and mobile telco operators has been relatively flat over the past eight years, with annual spending levels for infrastructure hovering around $290 billion each year.  Synergy market data covers total capital expenditure for telco and hyperscale operators mostly around networking and data center hardware and software.

The final market segment covered in Synergy’s new data is enterprise spending on IT infrastructure, which grew 9 percent year over year in 2022 to roughly $210 billion.  The enterprise spend accounted for 29 percent of the total Capex infrastructure market in 2022.

“Enterprise spending has also bounced back a bit in the last two years after a soft spell in 2019 and 2020,” said Dinsdale.  ince 2016, enterprise IT spending has grown by an average of over 6 percent annually. Synergy said to make the market data numbers more comparable, enterprise spending covers data center hardware and software, networking and collaboration tools. It excludes enterprise spending on communication and IT services, devices and business software.

“There has also been something of a post-pandemic bounce back for both enterprise data centers and switches, the former being helped by higher costs due to supply chain issues that are being passed on in the form of higher ASPs [average selling price],” said Dinsdale.  “For equipment and software vendors, the good news is that overall IT infrastructure spending will continue to grow steadily over the next five years,” he added.

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About Synergy Research Group:

Synergy provides quarterly market tracking and segmentation data on IT and Cloud related markets, including vendor revenues by segment and by region. Market shares and forecasts are provided via Synergy’s uniquely designed online database SIA ™, which enables easy access to complex data sets. Synergy’s Competitive Matrix ™ and CustomView ™ take this research capability one step further, enabling our clients to receive on-going quantitative market research that matches their internal, executive view of the market segments they compete in.

Synergy Research Group helps marketing and strategic decision makers around the world via its syndicated market research programs and custom consulting projects. For nearly two decades, Synergy has been a trusted source for quantitative research and market intelligence.

To speak to an analyst or to find out how to receive a copy of a Synergy report, please contact [email protected] or 775-852-3330 extension 101.

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References:

https://www.srgresearch.com/articles/2022-capex-analysis-growth-in-hyperscale-and-enterprise-spending-telco-remains-in-the-doldrums

https://www.crn.com/news/cloud/cloud-provider-spend-on-it-capex-climbs-as-telecom-falls

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One thought on “Synergy Research: Growth in Hyperscale and Enterprise IT Infrastructure Spending; Telcos Remain in the Doldrums

  1. Part of the dominance of cloud service providers seems due to fact that till now telco’s have not monetized the efforts of their transformation, e.g they have not yet succeeded in the real monetization of Edge Networking or Edge Computing.

    I think this is where the next growth of Telco’s revenues will be, unless Public cloud providers become the leaders at services at the Edge of the network.

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