Market researcher Synergy Research Group released its results for Q1 2020, which show that public cloud infrastructure vendors gained the most from the start of the year.

Compared to Q1 of last year, the impact that the COVID-19 virus pandemic had on the data centre infrastructure market in both the cloud and non-cloud segments was clearly felt: global sales fell by 2% to $35.8 billion, which brought the steady growth trend to a halt. At the same time, sales in the non-cloud segment led by Microsoft, Dell HPE, Cisco, and VMWare went down by 4%.

“Many enterprises have been negatively impacted by the pandemic resulting in increased pressure on capital budgets and more impetus on shifting workloads to public cloud providers,” said John Dinsdale, Chief Analyst at Synergy.

Klemens Arro, the CEO of ADM Cloudtech, said that he has noticed similar developments in both Estonia and other countries, “We can clearly see that there has been a foundational change in our markets. If before, clients would consider whether they wanted a data centre or a public cloud, then now the question is about the efficient implementation and migration of public cloud services. This change can be seen in both the private and public sectors. There are many factors behind this change as well. The first one has nothing to do with the current global situation but is the natural growth of the public cloud and the growing awareness around the subject. However, we can also clearly see that COVID-19 has had an impact on the market. The most sudden change came from the need to quickly adapt businesses to the changing situation and to be able to quickly introduce new IT solutions or increase the capabilities of existing systems. Not knowing what will happen to the economy in the future is one of the main reasons why organisations are now more interested in the public cloud. Which makes sense since a lot of organisations are currently not interesting in making huge investments that would lock their finances down for years. Instead, they prefer cloud services that allow for quick corrections and changes when necessary.”

In contrast, the public cloud data centre infrastructure’s hardware and software vendors saw their revenues increase by 3% in Q1 when compared to last year, reaching $9.66 billion. The biggest earners in terms of market-share were: aggregated ODMs in China and the Far East, Dell, Microsoft, Inspur, and Cisco.

Altogether, servers, data storage, and networking accounted for 73% of total sales and operating systems, virtualisation software, cloud management, and network security software the remaining 37%.

“Cloud services revenues continue to grow by almost 40% per year, enterprise SaaS revenues are growing by almost 25%, search/social networking revenues are growing by over 15%, and e-commerce revenue are growing by over 20%, all of which are helping to drive growth and increased spending in public cloud infrastructure. Notably, most of these services are either little impacted by COVID-19 or may be stimulated by changed enterprise and consumer behaviour,” said Dinsdale.

Analysts at IDC also mentioned the fact that ODMs that produce storage kit for the biggest builders of public cloud – the so-called hyperscalers – sold $4.9 billion worth of equipment in Q1, which is an increase of 6.9% year-on-year. At the same time, enterprise external OEM storage system sales went down by 8.2% to $6.5 billion.

Individual OEM sales results saw double digit declines in some cases: for example, NetApp’s sales went down by a fifth to $715.7 million, HPE’s sales went down by 17% to $646.2 million, and market leader Dell’s sales went down by 8.2% to $2.162 billion. Meanwhile, IBM’s sales went up by 3.8%, Pure’s by 7.7%, and Huawei’s by 17.7%.

“Knowing all the factors that affect those numbers, it is not surprising at all. If we add onto it market trends, the current global situation, and the uncertainty towards the future that stems from that, then it becomes much more important to ask what the end of this year and the beginning of 2021 have in store for us. If the global economy falls even further, then that will impact the cost-management decisions made in all sectors and will drive everyone to implement cloud services to an even bigger extent even faster,” said Arro, the CEO of ADM Cloudtech.

IDC did not share their estimates for how the market situation between ODMs vs OEMs may change throughout the rest of this year. IDC’s Research Manager Sebastian Lagana said that OEM’s will be facing “stiff headwinds” in the next quarter due to the virus and emphasised that the ODM’s took advantage of the increasing sales from hyperscalers. Lagana also added that spending by public cloud vendors will definitely continue to grow as more and more enterprises allow their employees to work from home, individuals and employees implement cloud-based collaboration tools, and the general quality of streaming entertainment and consumption requirements continues to be improved upon.