Cloud overtakes on-prem data centers in 2020

Sees biggest growth in 10 years.

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Why the sudden growth in cloud spending?

Although cloud services have seen substantial growth consistently in the past decade (52% on average), 2020’s explosive growth wasn’t “natural”. One of the biggest (and more obvious) factors in this jump was the global pandemic.

Why did on-prem expenditure fall so much?

The average annual spending growth for on-premises solutions was just 2% but it fell by 6% in 2020 — why? Well, as we mentioned, COVID-19 obviously played a very big role in this drop. However, internal factors also played a role. For instance, cloud computing has been more affordable for enterprises in almost every industry for a while now and it was very likely to decrease, irrespective of a global health crisis. Granted, the pandemic increased the extent of the decrease.

Cloud versus on-prem

It’s important to understand that the market share between cloud services and on-premises services isn’t a pie — one having more share doesn’t mean the other has to have less. In fact, if anything the pie is only growing. As the data storage and computing needs increase worldwide, businesses are looking for more servers, most of which happen to be in cloud infrastructure due to lower costs, lower administrative overhead, better out-of-the-box security, etc.

What to expect next year?

Judging from historical performance, it would be safe to assume that the two trends discussed will very likely continue into next year. However, as vaccine rollout has already begun in most parts of the world, we can also expect COVID-19 to have less influence. This less severe impact of the pandemic will very likely “normalize” both the growth and decline figures in cloud and on-prem spending respectively. On top of this, the data reveals that cost has been a major consideration in budget allocation which favors cloud services as they are more affordable for the majority of use cases.

Founder/CTO at D3V Technology Solutions, a Dallas-based cloud engineering firm & Google Cloud partner.