Cloud IT infrastructure revenues are on the rise, with sales from servers, storage and Ethernet switches growing by 8.1 percent in the third quarter of 2016 from a year ago as sales of most traditional hardware plummeted.

In International Data Corp.’s latest Worldwide Quarterly Cloud IT Infrastructure Tracker, the analyst firm said that vendor revenues from sales of infrastructure products — servers, storage and Ethernet switches — for public and private clouds grew to $8.4 billion. Further growth is expected in 2017 too, as so-called hyperscale data center operators continue to build out their facilities.

Market watchers have long predicted that cloud information technology infrastructure spending will eventually surpass that of on-premises IT infrastructure, and IDC’s latest report seems to confirm that trend. The overall share of cloud IT infrastructure sales climbed to 39 percent of all IT infrastructure spending in the third quarter, up from less than 35 percent a year ago, IDC said.

Around $3.3 billion of the total $8.4 billion spent on cloud IT infrastructure was pumped into private clouds, with the rest going into public clouds.

The best-performing segment in the cloud market was Ethernet switches, which saw sales growth of 46.2 percent year-over-year in the public cloud and 60.8 percent in private cloud. Storage sales also rose, by 9 percent in private clouds and 3 percent in public clouds, while server sales increased by 3.2 percent and 6.8 percent, respectively.

In contrast to the cloud’s rise, revenues in what IDC calls the “traditional (non-cloud) IT infrastructure segment” fell by 10.8 percent from a year ago. There, server sales declined by 12.9 percent, while Ethernet switches and storage sales also fell, by 1.6 percent and 8.6 percent, respectively.

Hyperscale to propel new cloud growth in 2017

The good news for cloud IT infrastructure sellers is that IDC is predicting a big year ahead. The analyst firm reckons that a wave of new hyperscale data center buildouts and the continued expansion of service providers building out their own clouds will propel cloud hardware spending to grow by 18.2 percent, to $44.2 billion, by the end of 2017. Of that lump sum, 61.2 percent will be furnished on public cloud infrastructure, while another 14.6 percent will go toward “off-premises private cloud environments.”

“As network upgrades continue to prop up cloud growth overall, the hyperscale cloud datacenters are coming and they will drive new server and storage deployments over the next few quarters,” said Kuba Stolarski, research director for computing platforms at IDC.

Things don’t look so bright for the on-premises IT infrastructure market, however, as IDC reckons spending there will decline by 3.3 percent in 2017. Even so, on-premises gear will still account for the largest chunk of the overall market, at 57.1 percent.

Shifting the spotlight onto manufacturers, IDC revealed that Dell Technologies Inc. and Hewlett-Packard Enterprise Co. are still the top dogs, with Dell emerging just ahead of its rival with $1.3 billion in sales over the third quarter, compared with HPE’s $1.25 billion. HPE will be hoping to steal the top spot from its rival soon, however, as it recorded sales growth of 0.2 percent while Dell saw a 5 percent decline.

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