Abstract means to be created outside of any conventions or norms that apply to whatever it is, but abstraction technology is entirely different. It is the technology by which a programmer hides everything except relevant data about an object, and the aim with is to reduce complexity. Abstraction technology has been integral to the development of cloud computing, and of course we don’t need to go on even a bit about how it has so wholly changed the landscape of the digital world and business within it to a great extent.
With regards to cloud infrastructure, virtualization is a key part of how it is possible to set up a cloud environment and have it function the way it does. Virtualization is an abstraction technology itself, and it separates resources from physical hardware and pools them into clouds. For there the software that takes direction of those resources is known as a hypervisor, where the machine’s CPU power, memory, and storage are then virtualized themselves. It was almost unheard of for hypervisors to be maxed out for the early years of cloud computing. Not anymore.
This leads to a different angle on why cloud infrastructure growth continues full force even though it’s becoming more challenge in relation to the expense of it. This is a topic that any good Canadian web hosting provider is going to take an interest in and that’s the case for those of us here at 4GoodHosting too. Servers are part of hardware of course, and the way virtualization can connect two servers together without any literal physical connection at all is at the very center of what makes cloud storage so great.
The mania surrounding AI as well as the impact of inflation have pushed cloud spending even more, and the strong contributing factors to that are what we’re going to lay out here today.
Spending on computer and storage infrastructure products in the first quarter increased to $21.5 billion last year, and this year spending on cloud infrastructure continues to outpace the non-cloud segment, which declined 0.9% in 1Q23 to $13.8 billion. Unit demand went down 11.4%, but average selling prices grew 29.7%.
The explanation for these gains seems to be that the soaring prices are likely from a combination of inflationary pressure as well as a higher concentration of more expensive, GPU-accelerated systems being deployed by cloud service providers. AI is factoring in two, with unit sales for servers down for the first time in almost two decades and prices up due to the arrival of dedicated AI servers with expensive GPUs in them.
The $15.7 billion spent on cloud infrastructure in the first quarter of 2023 is a gain of 22.5% compared to a year ago. Continuing strong demand for shared cloud infrastructure is expected, and it is predicted to surpass non-cloud infrastructure in spending within this year. So we can look for the cloud market to expand while the non-cloud segment will contract with enterprise customers shifting towards capital preservation.
A dip in the sales of servers and storage for hosting under rental/lease programs is notable here too. That segment declined 1.5% to $5.8 billion, but the fact that over the previous 12 months sales of gear into dedicated cloud use has gone up 18+% makes it fairly clear that was an aberration. The increasing migration of services to the cloud is also a reflection of how on-premises sales continue to slow while cloud sales increase
Spending on cloud infrastructure is expected to have a compound annual growth rate (CAGR) in the vicinity of 11% over the 2022-2027 forecast period, with estimates that it will reach $153 billion in 2027 and if so making up for 69% of the total spent on computer and storage infrastructure We’ll conclude for this week by mentioning again just how front and center AI is in all of this. It is extremely compute- and storage-intensive nature makes it expensive, and many firms now have AI-ready implementation as a top priority. A survey found that 47% of companies are making AI their top spending area in technology over the next calendar year.