Data Spending Moving to the Cloud
The reallocation of IT spending from traditional on-premises to cloud resources will impact about $1 trillion in IT spending through 2020. We look at four key spending shifts.
- By Steve Swoyer
- August 16, 2016
Gartner uses the "D" word -- "disruption" -- to describe the impact cloud computing will have on IT-related spending over the next five years. What's more, Gartner means real disruption -- not the stuff that would-be market leaders routinely trumpet in press releases.
In fact, a recent Gartner publication described cloud computing as "one of the most disruptive forces of IT spending since the early days of the digital age" -- one that (directly or indirectly) will impact about $1 trillion in IT spending from 2016 through 2020. That's disruption.
Gartner research vice president Ed Anderson outlined what's at stake. "Cloud-first strategies are the foundation for staying relevant in a fast-paced world. The market for cloud services has grown to such an extent that it is now a notable percentage of total IT spending ... helping to create a new generation of start-ups and 'born in the cloud' providers," Anderson said in a statement.
Gartner's research suggests that IT spending will continue to shift from traditional (on-premises) investments to the cloud. By 2020, about $216 billion in IT spending will have shifted to the cloud.
Four Segments Shifting to the Cloud
What workloads -- or more precisely, what kinds of IT assets -- will make the shift?
Gartner breaks "cloud shift" (its term) down into four market segments: business process outsourcing, application software, application infrastructure software, and system infrastructure.
Business process outsourcing: In 2016, the total market for business process outsourcing came to about $120 billion, according to Gartner; cloud services accounted for approximately $42 billion of this.
Business process outsourcing even gets its own as-a-service category: business process-as-a-service (BPaaS). Through 2020, Gartner projects a 43 percent "cloud shift rate" in business process spending toward BPaaS.
Application software: Today, application software is a $144 billion market of which $36 billion is spent on cloud services. In the cloud, application software is typically exposed via SaaS (software-as-a-service).
Over the forecast period, Gartner projects a cloud shift rate of 37 percent of application spending toward SaaS. Examples of BI or analytics SaaS offerings include Microsoft Power BI, Tableau Public, and SAP Lumira Cloud, among others.
Some cloud BI offerings (e.g., Birst, GoodData, MicroStrategy Cloud) are basically BI platforms in the cloud. They're more like platform-as-a-service (PaaS) offerings.
Application infrastructure software: Speaking of PaaS, it's the dominant way application infrastructure software is exposed in the cloud. Today, IT spending on software comes to about $177 billion; a mere $11 billion of this is on PaaS. (The PaaS cloud shift rate is a comparatively small 10 percent through 2020, according to Gartner.)
Examples of PaaS services include Amazon's Relational Database Service (RDS), Redshift data warehouse, and Elastic MapReduce (EMR); Microsoft's Azure Data SQL Data Warehouse and SL Database; and Google's CloudSQL RDBMS and Cloud DataProc.
System infrastructure: In the cloud, system infrastructure is typically exposed via infrastructure-as-a-service (IaaS). Spending on system infrastructure resources accounts for the single largest portion of IT spending: almost $300 billion. Only $22 billion is spent on IaaS offerings such as Amazon Elastic Compute Cloud (EC2), Google's Compute Engine, and Microsoft's Azure.
IaaS in this sense describes a virtual hosting environment, typically for operating-system-level virtualization. Customers subscribe to EC2 or Azure to spin up virtual machine images of operating systems such as Linux or Windows -- although IaaS virtualization is also used to support container systems such as Docker.
Gartner puts the cloud shift rate for system infrastructure at 17 percent through 2020.
The market watcher says the first-order (or direct) effects of cloud shift will be dwarfed by second-order (or indirect) effects. Gartner notes that "enterprise storage needs could be met with a lower up-front cost and far more scalability by switching to cloud solutions instead of buying dedicated hardware."
The upshot, Anderson concludes, is that organizations must rethink everything in order to prepare for (and take advantage of) the shift to the cloud.
"Cloud shift is not just about cloud. As organizations pursue a new IT architecture and operating philosophy, they become prepared for new opportunities in digital business, including next-generation IT solutions such as the Internet of Things," Anderson said. "Furthermore, organizations embracing dynamic, cloud-based operating models position themselves better for cost optimization and increased competitiveness."
About the Author
Stephen Swoyer is a technology writer with 20 years of experience. His writing has focused on business intelligence, data warehousing, and analytics for almost 15 years. Swoyer has an abiding interest in tech, but he’s particularly intrigued by the thorny people and process problems technology vendors never, ever want to talk about. You can contact him at [email protected].