How Server and Storage Sales Deteriorated Due to Pandemic?

The global IT spending on servers and storage units have taken a hit. As coronavirus pandemic is still spreading terror and claiming lives, companies are switching move to cloud data and storage services. According to the report by International Data Corporation (IDC) Worldwide Quarterly Server Tracker and Worldwide Quarterly Enterprise Storage Systems Tracker, the sales are to go further down in 2020. Late in March, IDC had predicted that the worldwide external enterprise storage revenue will drop 5.5 percent year over year to US$28.7 billion in 2020, while global server sales will decline 3.4 percent to US$88.6 billion. The server market is expected to decrease by 11.0 percent in Q1 and 8.9 percent in Q2 and then return to growth in the second half of the year. The external ESS market is forecast to dip 7.3 percent in Q1 and 12.4 percent in Q2 before returning to slight growth by the end of 2020 with further recovery expected in 2021.

The report also states that China-based vendors will face the worst impact in the first quarter while other nations shall see the downfall in the second quarter. While shutdowns have led to the disruption of business sectors driven by enterprise customers, the market has also seen an unexpected demand in services, including video streaming, Web conferencing, and online retail. As the revenue collection from industries like transportation, hospitality, retail which are most affected by the pandemic, goes down, the cloud-based services will gain momentum. Not only that, but even several organizations are also considering adopting cloud services for their compute and storage needs. This sudden surge has put tremendous pressure on the IT infrastructure in cloud service provider datacenters leading to the demand for servers and system components.

Hence we see two types of IT market now and in days to come: one driven by a decrease in demands from enterprise buyers and the other driven by increasing demand from cloud service providers. This means while server sales will bear a mild drop in sales, external storage devices will drastically drop till the end of 2020. By breaking down IDC's server market forecast for 2020, we find that the sales of x86 servers will decrease 2.2 percent year over year to US$81.9 billion, while non-x86 revenue is expected to drop 16 percent to US$6.7 billion. However, over a while, both the market are expected to return to normalcy and grow further. The server market is likely to bring a compound annual growth rate (CAGR) of 4.9 percent over the 2019-2024 forecast period with revenues reaching US$116.6 billion in 2024. In the meantime, the external ESS market will see a five-year CAGR of 1.3 percent growing to US$32.4 billion in 2024. Concerning the quarterly impact, IDC expects the server market to reduce by 11 percent year over year in the first quarter, then about 9 percent in the second quarter of 2020. However, IDC expects a return to growth in the second half of the year.

During swine flu pandemic similar situation was observed then. The global spending on servers and storage fell by nearly 14 percent in 2009 and expanded by 13 percent during the following economic recovery in 2010. Experts believe this time too, companies and firms will react in the same manner. As the number of businesses is opting to work from home, the dependency on cloud services and storage will grow accordingly. Therefore the snooze mode on storage spending will be balanced by new expenditure on cloud-based services. As a result, both storage and server vendors, cloud providers, along with companies are working towards meeting this crisis requirement and to maintain the operations and supply line challenges during this terrible time.