Spending in IT Hardware 2018: A Breakdown

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The cloud may have taken over in 2017 — in fact, it was the #1 fastest-growing IT market last year — but this year has been a different story. Hardware companies need not fret, as 2017 (and predicted for 2018) still saw the most profit in IT infrastructure spending. Furthermore, several hardware segments are “teaming up” to breathe new life into hardware, and to drive profits and growth for hardware in 2018. This article will examine the trends seen thus far in hardware this year.

The Impact of Taxes

According to a Morgan Stanley survey of 100 CIOs, many enterprises are now opting for a hybrid computing solution. Rather than fixate on only cloud computing, companies are splitting IT workloads between the cloud and on-site hardware solutions.

Enterprises have recently gained a monetary incentive to keep hardware solutions around, too. U.S. law now supports accelerated depreciation for IT hardware, which allows for greater tax deductions in this category. According to Morgan Stanley, this incentive allows companies to increase their capital expenditures and depreciate all of the costs in year one.

Trending in Hardware: Biggest Growth Categories

When it comes to the biggest growth area in enterprise hardware, it almost always comes down to one category: IT infrastructure spending. According to Synergy Research Group, which is a research company that follows IT market trends, traditional datacenter servers were at the forefront of all enterprise IT spending in 2017. Likewise, servers are expected to be the biggest segment in 2018 as well. Datacenter servers did, however, drop by 1 percent when compared to the previous year. Synergy found that the largest vendor for datacenter servers was enterprise giant HPE (Hewlett Packard Enterprise). Servers accounted for over $31 billion in total infrastructure sales, and is expected to rise this year, due at least in part to the impact of the new tax incentives.

Just behind servers was networking solutions, or more specifically switches and routers — and it only trailed by $2 billion. Total sales accounted for about $29 billion. This number indicates a 4 percent increase from last year. Cisco still holds the key to IT networking, and still leads the switches and routers category.

Trailing behind networking components was the cloud and hosted services, accounting for about $21 billion. So while it did see the most growth last year, it still did not top the list. It trailed behind servers by about $10 billion. Microsoft was the leading cloud vendor of 2017.

The rest of the IT spending categories include on-premises collaboration at $16 billion, network security at $10 billion, and wireless networking solutions at about $6 billion.

So what’s to come this year? Jeremy Duke, who is the founder and chief analyst of Synergy, has said that even though cloud computing was the fast-growing segment of 2017 (and may continue to grow even bigger this year), he does not expect it to top the spending lists of enterprises. For the next five years, he said, enterprise spending is expected to remain with datacenter servers at its forefront.

Enterprise Storage in 2018

Another study to take note of is the 2018 State of Infrastructure Study, a survey completed by Interop ITX correspondent Stan Gibson. It polled 100 leaders in IT enterprise groups. In it is an in-depth look at how companies are investing in more storage — both hardware and cloud — in 2018. More specifically, it looks at how companies are handling their data and their workloads in their data centers, how they are using data storage in the cloud, and how they are looking at emerging storage technologies. The report says that the need to increase data storage is the #1 thing driving changes in IT enterprise infrastructure. The cause of the change is the ongoing increases in digital information as well as increases in market share.

The report notes that the surge in storage growth is far from temporary. The survey found that the biggest drivers spawning changes in IT infrastructure was growth of storage and data, as expected. It was the top response at 40 percent. The need of storage solutions is here to stay.

Out of all 100 survey respondents, just one responded that the company, Logistics 2000, Inc., had moved on to an “almost” entire cloud-based infrastructure solution. Still, he admitted that the company still utilizes several servers, but will not be purchasing any more in the near future.

When the respondents were asked if they use cloud storage, there were mixed responses. Thirty-seven percent said they did, but only for backup and recovery, while 31 percent said they use it for archiving. Thirty percent said they use it for application-specific storage. This poll allowed multiple responses, so the percentages were greater than 100 percent.

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