Enterprise

On-prem data centers are hanging in, but cloud capacity is growing much faster

Comment

Servers sitting on top of clouds to show a cloud data center concept.
Image Credits: baranozdemir / Getty Images

In 2017, on-prem data centers accounted for nearly 60% of capacity. By 2027, Synergy Research is projecting that number will be cut in half, but that data doesn’t tell the whole story. New research from Synergy finds that on-prem data center growth is actually hanging in, but over the next five years, growth will remain essentially unchanged. At the same time, hyperscale data centers operated by the largest cloud companies will continue to grow at a hefty rate.

It’s not exactly a death knell for on-prem, but capacity is clearly shifting to the cloud. Today, Synergy reports there are 900 hyperscale data centers worldwide, with that number split pretty much evenly between those facilities that are owned by the cloud providers and those that are leased. On-prem still accounts for 40% of usage.

Synergy is predicting that in five years, the cloud providers will control over half all capacity and the on-prem number will fall to 30%. People have been predicting for years that most enterprise workloads would eventually move to the cloud, but like many technology shifts, change has happened more slowly than perhaps those in the industry thought.

Chart with data from Synergy Research showing that on prem controlled 60% of data center capacity in 2017, 40% in 2022 and is expected to drop to 30% by 2027.
Image Credits: Synergy Research

In 2019 at AWS re:Invent, then AWS CEO Andy Jassy expressed impatience at the rate of change. He clearly wanted people to start moving to the cloud faster, and his keynote speech was peppered with advice on how to do that.

“It’s easy to go a long time dipping your toe in the water if you don’t have an aggressive goal,” Jassy said at the time, and perhaps this new data and the trend lines predictions Synergy is making show that we could be finally getting to a tipping point in the cloud.

For AWS, however, it might not be growing the way that Jassy hoped. While growth has slowed pretty dramatically overall for the cloud infrastructure market, it has plunged for AWS in particular, dropping into the teens in its most recent report, compared with 37% growth in the year prior. In terms of market share, that translated into 32% for AWS, still the clear leader, but Microsoft has continued to creep up with 23% last quarter. Google was in third place with 10%.

Those numbers might paint a confusing picture, but in spite of the short-term slow-down we are seeing, Synergy believes that as the economy begins to steady, the trend to the cloud will only accelerate, and that will translate into less on-prem data center capacity in the not-too-distant-future.

Synergy’s spending numbers tell a clearer story: “Ten years ago, enterprises were spending over $80 billion per year on IT hardware and software for their own data centers, while spending well under $10 billion on nascent cloud infrastructure services. Fast forward to the present day and spending on data center hardware and software has only grown by an average 2% per year, while spending on cloud services has ballooned, growing by an average 42% per year to reach $227 billion in 2022,” Synergy reports.

All that is to say, that while on-prem data centers aren’t going away anytime soon, they are beginning to diminish as a percentage of IT spending and data center capacity, and that trend seems unstoppable.

More TechCrunch

Some startups choose to bootstrap from the beginning while others find themselves forced into self funding by a lack of investor interest or a business model that doesn’t fit traditional…

VCs wanted FarmboxRx to become a meal kit, the company bootstrapped instead

Uber and Lyft drivers in Minnesota will see higher pay thanks to a deal between the state and the country’s two largest ride-hailing companies. The upshot: a new law that…

Uber and Lyft’s ride-hailing deal with Minnesota comes with a cost

Andreessen Horowitz’s American Dynamism fund has established a new fellowship program aimed at introducing top engineers and technologists to venture investing, a move that could help the firm identify less…

a16z’s American Dynamism team launches program to introduce technical minds to VC

Another fintech startup, and its customers, has been gravely impacted by the implosion of banking-as-a-service startup Synapse. Copper Banking, a digital banking service aimed at teens, notified its customers on…

Teen fintech Copper had to emergency discontinue its banking, debit products

Autodesk — the 3D tools behemoth — has acquired Wonder Dynamics, a startup that lets creators quickly and easily make complex characters and visual effects using AI-powered image analysis. The…

Autodesk acquires AI-powered VFX startup Wonder Dynamics

Farcaster, a blockchain-based social protocol founded by two Coinbase alumni, announced on Tuesday that it closed a $150 million fundraise. Led by Paradigm, the platform also raised money from a16z…

Farcaster, a crypto-based social network, raised $150M with just 80K daily users

Microsoft announced on Tuesday during its annual Build conference that it’s bringing “Windows Volumetric Apps” to Meta Quest headsets. The partnership will allow Microsoft to bring Windows 365 and local…

Microsoft’s new ‘Volumetric Apps’ for Quest headsets extend Windows apps into the 3D space

The spam reached Bluesky by first crossing over two other decentralized networks: Mastodon and Nostr.

The ‘vote Trump’ spam that hit Bluesky in May came from decentralized rival Nostr

Welcome to TechCrunch Fintech! This week, we’re looking at the continued fallout from Synapse’s bankruptcy, how Layer wants to disrupt SMB accounting, and much more! To get a roundup of…

There’s a real appetite for a fintech alternative to QuickBooks

The company is hoping to produce electricity at $13 per megawatt hour, which would be more than 50% cheaper than traditional onshore wind.

Bill Gates-backed wind startup AirLoom is raising $12M, filings reveal

Generative AI makes stuff up. It can be biased. Sometimes it spits out toxic text. So can it be “safe”? Rick Caccia, the CEO of WitnessAI, believes it can. “Securing…

WitnessAI is building guardrails for generative AI models

It’s not often that you hear about a seed round above $10 million. H, a startup based in Paris and previously known as Holistic AI, has announced a $220 million…

French AI startup H raises $220M seed round

Hey there, Series A to B startups with $35 million or less in funding — we’ve got an exciting opportunity that’s tailor-made for your growth journey! If you’re looking to…

Boost your startup’s growth with a ScaleUp package at TC Disrupt 2024

TikTok is pulling out all the stops to prevent its impending ban in the United States. Aside from initiating legal action against the U.S. government, that means shaping up its…

As a US ban looms, TikTok announces a $1M program for socially driven creators

Microsoft wants to put its Copilot everywhere. It’s only a matter of time before Microsoft renames its annual Build developer conference to Microsoft Copilot. Hopefully, some of those upcoming events…

Microsoft’s Power Automate no-code platform adds AI flows

Build is Microsoft’s largest developer conference and of course, it’s all about AI this year. So it’s no surprise that GitHub’s Copilot, GitHub’s “AI pair programming tool,” is taking center…

GitHub Copilot gets extensions

Microsoft wants to make its brand of generative AI more useful for teams — specifically teams across corporations and large enterprise organizations. This morning at its annual Build dev conference,…

Microsoft intros a Copilot for teams

Microsoft’s big focus at this year’s Build conference is generative AI. And to that end, the tech giant announced a series of updates to its platforms for building generative AI-powered…

Microsoft upgrades its AI app-building platforms

The U.K.’s data protection watchdog has closed an almost year-long investigation of Snap’s AI chatbot, My AI — saying it’s satisfied the social media firm has addressed concerns about risks…

UK data protection watchdog ends privacy probe of Snap’s GenAI chatbot, but warns industry

U.S. cell carrier Patriot Mobile experienced a data breach that included subscribers’ personal information, including full names, email addresses, home ZIP codes and account PINs, TechCrunch has learned. Patriot Mobile,…

Conservative cell carrier Patriot Mobile hit by data breach

It’s been three years since Spotify acquired live audio startup Betty Labs, and yet the music streaming service isn’t leveraging the technology to its fullest potential — at least not…

Spotify’s ‘Listening Party’ feature falls short of expectations

Alchemist Accelerator has a new pile of AI-forward companies demoing their wares today, if you care to watch, and the program itself is making some international moves into Tokyo and…

Alchemist’s latest batch puts AI to work as accelerator expands to Tokyo, Doha

“Late Pledge” allows campaign creators to continue collecting money even after the campaign has closed.

Kickstarter now lets you pledge after a campaign closes

Stack AI’s co-founders, Antoni Rosinol and Bernardo Aceituno, were PhD students at MIT wrapping up their degrees in 2022 just as large language models were becoming more mainstream. ChatGPT would…

Stack AI wants to make it easier to build AI-fueled workflows

Pinecone, the vector database startup founded by Edo Liberty, the former head of Amazon’s AI Labs, has long been at the forefront of helping businesses augment large language models (LLMs)…

Pinecone launches its serverless vector database out of preview

Young geothermal energy wells can be like budding prodigies, each brimming with potential to outshine their peers. But like people, most decline with age. In California, for example, the amount…

Special mud helps XGS Energy get more power out of geothermal wells

Featured Article

Sonos finally made some headphones

The market play is clear from the outset: The $449 headphones are firmly targeted at an audience that would otherwise be purchasing the Bose QC Ultra or Apple AirPods Max.

8 hours ago
Sonos finally made some headphones

Adobe says the feature is up to the task, regardless of how complex of a background the object is set against.

Adobe brings Firefly AI-powered Generative Remove to Lightroom

All cars suffer when the mercury drops, but electric vehicles suffer more than most as heaters draw more power and batteries charge more slowly as the liquid electrolyte inside thickens.…

Porsche Ventures invests in battery startup South 8 to boost cold-weather EV performance

Scale AI has raised a $1 billion Series F round from a slew of big-name institutional and corporate investors including Amazon and Meta.

Data-labeling startup Scale AI raises $1B as valuation doubles to $13.8B