In 2017, on-premises data centers accounted for nearly 60% of capacity, serving as the bedrock of data storage and processing 1. However, the landscape of data storage is undergoing a rapid transformation. As we move towards 2027, the capacity accounted for by on-premises data centers is projected to be cut in half 2.
This doesn’t mean that the growth of on-premises data centers will come to a standstill. In fact, new research suggests that the expansion of on-premises data centers will remain steady over the next five years 3. The major shift is not in the decline of on-premises data centers but in the meteoric rise of cloud capacity.
Hyperscale data centers, operated by cloud companies, are growing at a fast pace. These are large-scale public cloud data centers that provide scalable applications to handle extensive computing workloads. Currently, there are about 900 hyperscale data centers globally, split between those owned by cloud providers and those that are leased.
But why is this shift happening? The answer lies in the unique advantages that cloud computing offers. Cloud services provide businesses with the flexibility to scale up or down their IT requirements as needed, which can lead to cost savings. They also offer a range of services such as AI, machine learning, and analytics, which are often out of reach for smaller businesses to implement on their own. Moreover, the cloud allows for remote access, an increasingly important feature in today’s mobile and global workforce.
Mr. Adel Rizk, Head of Data Center Division at EDARAT GROUP, stated, “While the cloud-to-on-premise capacity ratio will continue to see hyperscalers grow, in absolute terms, the actual on-premise capacity is expected to drop only marginally.” He added, “Likewise, while spending on the cloud has increased dramatically, this hasn’t been at the expense of on-premise.”
Despite these benefits, on-premises data centers still hold a significant portion of the market. According to Synergy Research Group, on-premises still accounts for 40% of data center usage. This is because on-premises data centers offer their own set of advantages. For example, businesses have full control over their data and infrastructure, and they can ensure a higher level of security and compliance.
However, the trend is clear. Synergy predicts that in five years, cloud providers will control over half of all capacity, while on-premises will fall to 30%. This shift has been slower than initially expected, largely due to factors like regulatory concerns and data privacy issues. But as these concerns are addressed and the economy stabilizes, the shift to the cloud is expected to accelerate.
In conclusion, while on-premises data centers are not going away anytime soon, their role is diminishing as a percentage of IT spending and data center capacity. The future of data storage and processing seems to lie in the cloud, and businesses are increasingly realizing the benefits of cloud adoption.