Executive Summary
The infrastructure services sector was humming along and then the COVID-19 pandemic happened, shutting down economies around the world and sparking a wave of online content consumption and remote working.
Internet infrastructure found itself one of the few industries that, for the most part, is going to do just fine in this new environment. In fact, the pandemic could very well raise the profile of the sector and underscore its value proposition to unprecedented levels. As remote working and e-commerce become central to everyday life, the underlying infrastructure to support it can only move in one direction. And it is a good bet that things are only going to continue accelerating. The floodgates are open.
While the pandemic dominated the headlines, the recent quarter saw the usual steadiness in activity across the sector. The M&A arena was busy and big bets were made in global data centre markets and edge compute infrastructure. Driven by hyperscale, the market is extending across the globe and entering new and emerging markets at a frantic pace.
Leading up to the pandemic, there have been ongoing shifts in the sector’s business models. Managed third party cloud grew out of the rise of hyperscale and has emerged as a category of its own. But it is also constantly evolving. In the past quarter, we saw more focus and specialization in these services. Support for widely used third party applications is one area of growth and now service providers are managing and taking over DevOps functions for customers.
The sector has been on a steady trajectory, but the COVID-19 pandemic is going to turn things on its head for several quarters, if not, years to come. There are now new tailwinds and headwinds emerging, but over time, the tailwinds are likely to prevail and the sector will come out of this stronger than ever. But as it does, there is definitely going to be separation in the competitive landscape and a reckoning for the weaker links. Those not ready to be a part of the healthiest parts of the value chain will continue to drop off and fade. Those targeting the heart of the value chain, and serving the right kinds of customers, face a unique opportunity that has the potential to pay off in spades. Just as the recession of 2008-09 sparked a wave of growth for cloud and infrastructure services, so too will the COVID-19 pandemic just a decade later.
