The shift to new, cloud-based alternatives is relentless
Twenty-eight per cent of spending within key enterprise IT markets will shift to the cloud by 2022, up from 19 per cent in 2018, according to Gartner.
The analyst firm says enterprise IT spending on cloud-based offerings will be faster than growth in traditional, non-cloud IT offerings.
Gartner predicts more than US$1.3 trillion in IT spending will be directly or indirectly affected by this shift.
“Providers that are able to capture this growth will drive long-term success or failure through the next decade,” says Gartner research vice president Michael Warrilow, in the report Market Insight: Cloud Shift — 2018 to 2022, which he co-authored with Ed Anderson.
Warrilow says the shift of enterprise IT spending to new, cloud-based alternatives is relentless, although it’s occurring over the course of many years due to the nature of traditional enterprise IT.
“Cloud shift highlights the appeal of greater flexibility and agility, which is perceived as a benefit of on-demand capacity and pay-as-you-go pricing in cloud.”
Cloud shift refers to the movement of IT spending from traditional or non-cloud markets to new, public cloud alternatives.
Warrilow says organisations in Australia and New Zealand continue to be among the faster, earlier adopters of public cloud – compared to global averages.
“We expect this to continue through to at least 2022,” he tells CIO New Zealand.
Warrilow notes that despite this growth, traditional offerings will still constitute 72 per cent of the addressable revenue for enterprise IT markets in 2022.
Thus, he recommends technology product managers to optimise the opportunity for existing offerings by investing in hybrid cloud use cases.
He also recommends that technology providers use cloud shift as a measure of market opportunity. They should assess growth rates and addressable market size opportunities in each of the four cloud shift categories: system infrastructure, infrastructure software, application software and business process outsourcing.
“The shift to cloud until the end of 2022 represents a critical period for traditional infrastructure providers, as competitors benefit from increasing cloud-driven disruption and spending triggers based on infrastructure asset expiration,” says Warrilow.
“As cloud becomes increasingly mainstream, it will influence even greater portions of enterprise IT decisions, particularly in system infrastructure as increasing tension becomes apparent between on- and off-premises solutions.”
He points out the largest cloud shift prior to 2018 occurred in application software, particularly driven by customer relationship management (CRM).
CRM has already reached a tipping point where a higher proportion of spend occurs in cloud than in traditional software. This trend will continue and expand to cover additional application software segments, including office suites, content services and collaboration services, through to the end of 2022. Application software will retain the highest percentage of cloud shift during this period.
“What is most evident is that ongoing analysis of cloud shift will be required over time,” says Warrilow.