Tech giants spent nearly $75B on hyper-scale infrastructure last year

The capital expenditure (capex) of hyper-scale cloud operators came to US$75 billion for 2017, with US$22 billion in the fourth quarter, a 19 per cent growth over 2016.

Amazon, Apple, Facebook, Google and Microsoft accounted for more than 70 per cent of Q4 hyper-scale capex, making them the top five spenders, according to data from Synergy Research Group.

In fact Synergy Research Group said the top five spenders accounted for more than US$13 billion per quarter.

Synergy analysed the capex and data centre footprint of 24 of the world’s major cloud and internet service firms, including the largest operators in infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), software-as-a-service (SaaS), search, social networking and e-commerce.

Synergy noted that Amazon and Facebook showed strong capex growth in the past year. According to Synergy, most of the hyper-scale capex is invested in expanding “huge” data centres.

There are currently 400 of these data centres, according to the research firm. In a research from December 2016, Synergy said that the number of large data centres operated by hyper-scale providers hit the 300 mark. At the time it estimated the 400 mark would be achieved by the end of 2018 but it said it has already happened.

“Over the last four years we have seen many companies try and fail to compete with the leading cloud providers. The capex analysis emphasises the biggest reason why those cloud providers are so difficult to challenge,” Synergy Research Group chief analyst and research director, John Dinsdale, said.

The other hyper-scale spenders that make the top ten list are Alibaba, IBM, Oracle, SAP and Tencent.

Among these five, Alibaba capex more than doubled in 2017, while growth at both Oracle and SAP was also above average. Other notables outside of the top ten include Baidu, eBay, JD.com, NTT, PayPal, Salesforce, Yahoo Japan and Yahoo/Oath.

Capex was only responsible for seven per cent of total revenues across all hyper-scale operators. Synergy explained that the ration can vary by company from two per cent to 17 per cent.

“Can you afford to pump at least a billion dollars a quarter into your data centre capex budget? If you can’t, then your ability to meaningfully compete with the market leaders is severely limited. Of course factors other than capex are at play, but the basic financial table stakes are enormous.”