Tier 1 cloud players sustain capex in defiance of pandemic

The COVID-19 pandemic does not appear to be affecting demand among Tier 1 cloud service providers for new data centre capacity, according to research from a leading analyst firm.

Baron Fung, Director with Dell’Oro Group, said he expects Tier 1 cloud service providers to increase data centre capex outlay in 2020, according to research he has conducted into their consumption and expansion plans.

“In 2019, we saw Tier 1 cloud service providers, in aggregate slowing their capex spending as they consumed excess server capacity,” commented Fung. “In 2020, we project this segment to increase capex by up to 15 to 20%, as some of the Tier 1 cloud service providers resume server capacity expansion.”

He identified the top four providers – Google, Amazon, Microsoft, and Facebook – as accounting for around a quarter of the world’s server shipments as used in cloud data centres.

“These four have significant influence on the global data centre supply chain and vendor landscape,” he added. “These companies are fairly vertically integrated and produce their own servers and networking equipment. Despite COVID-19, we have been hearing that demand for data centre equipment such as servers, and components such as networking chips, memory, and materials remains strong. However, it’s also possible that these cloud providers are also strengthening their inventories in anticipation of supply chain disruptions.”

Fung pointed out that the cloud sector’s consumption and expansion cycles are typically capacity-driven, rather than based on macro economics, and that demand for cloud services may be insulated from the impact of COVID-19 to some extent. He said the recent shift to work-from-home practices is placing greater demands on cloud services.

But while the public cloud platforms of Amazon, Microsoft and Google are on pace for growth, enterprises and some lower tier cloud providers may end up pausing IT spending in uncertain times as they seek to conserve cash and shore up their balance sheets. Fung also said that advertising revenue, which is the bread and butter business of Facebook and Google, could take a hit from the pandemic and infrastructure investments related to this area may slow accordingly.

“Cloud service providers that have a diversified business are likely to see in stronger expansion to address specific areas of their business in these challenging times,” he concluded.

For further reading try this link.




About Us

In the tech sector, NetEvents has provided a key communication channel over the past 20+ years. It fosters creative and profitable relationships between press, analysts and bloggers plus tech companies, technologists, industry CIOs/Senior execs and IT Buyers, channel partners and Solution Providers, as well as the tech investment community. NetEvents offers an efficient and highly productive complement to any existing market communications program.

Sign up for NetReporter and

©2020 NetEvents. All rights reserved​ | Privacy Policy
Share on facebook
Share on twitter
Share on email
Share on linkedin