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The latest forecast from analyst Gartner predicts that more than $1.3tn in IT spending will be directly or indirectly affected by the shift to cloud by 2022.
According to Gartner, 28% of spending in key enterprise IT markets will shift to the cloud by 2022, up from 19% in 2018. Growth in enterprise IT spending on cloud-based offerings will be faster than growth in traditional, non-cloud IT offerings. Despite this, traditional offerings will still constitute 72% of the addressable revenue for enterprise IT markets in 2022, according to Gartner’s forecasts.
“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,” said Michael Warrilow, research vice-president at Gartner. “The shift to cloud 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.”
The volume of application software in the cloud is expected to grow from 34% in 2018 to 40% in 2022. This growth in cloud-based application software will be driven by customer relationship management (CRM), according to Gartner.
CRM has already reached a tipping point, with a higher proportion of spend occurring in cloud than in traditional software. The analyst firm expects this trend to continue and expand to cover additional application software segments, including office suites, content services and collaboration services, through to the end of 2022.
Cloud-based system infrastructure spending is expected to double from 11% now to 22% in 2022. Gartner named system infrastructure as the market segment that would shift the fastest between now and 2022 as current assets reach renewal status.
At the other end of the scale, due to prior investments in datacentre hardware, virtualisation and datacentre operating system software and IT services, this market has seen the least shift towards cloud-based services, the analyst firm noted.
“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,” said 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-premise solutions.”
Managing cloud-based IT assets
Given that cloud computing will become a larger and larger part of enterprise IT, AJ Witt, an industry analyst at The Itam Review, recommended that IT departments prepare a strategy for managing cloud-based IT assets.
“Cloud services are very transactional. You can have a free account and buy them through a credit card,” he said. “The main challenge for traditional IT is that such cloud services are being bought outside of IT.”
While a Microsoft Office contract might take months to buy through traditional IT procurement, he said a cloud service such as Slack could be bought straight away, without IT’s knowledge.
Without sufficient oversight of the spending, a business’s cloud bills can quickly add up. For Witt, the situation is analogous to people who have both an Amazon Prime and a Netflix subscription. Users will not be using both services 100% of the time, which means the subscriptions become underused.
Regarding cloud-based IT services, Witt said: “Your internal costs are high and there is 30% wastage.” In his experience, this occurs when a business buys a cloud subscription bundle and then delays deploying all the subscriptions it acquired. Some of these subscriptions may never get used, leading to wastage in terms of the number of cloud subscriptions.
He said the business model of cloud providers is to encourage customers to buy and consume more of the services being offered. “Salesforce will typically stipulate a minimum number of seats and a minimum subscription growth. You are really pre-committing to spend more than you are currently using,” said Witt.
IT departments with mature IT service management procedures should be well-prepared, with tools and dashboards to buy IT capacity up-front. This often occurs as and when they acquire enterprise storage, networking or servers and need to forecast how demand will grow over a pre-determined time, such as two to five years before the IT asset is written off.
Witt believes the same principals need to be applied when acquiring cloud services. “If your IT management is mature, you should be able to understand how your capacity will grow,” he said.
But use of some cloud products is more dynamic. “You may use a cloud product for a few months then usage dies off,” he said, but the business will continue to pay for the subscription, leading to wastage, unless there is a way for IT to bring back the unused subscription so that it can be re-used by another user. He cited Adobe Creative Cloud as an example: “It may be used for one marketing campaign, and then not used for nine months.”
Another problem is when people buy a more feature-rich subscription than they require. “With Salesforce, you may have an ‘all-you-can-eat Ninja account’, but do you really need this if you only need to read a sales report at the end of the month?” Similarly, he said people buy the full AutoCAD suite when they are only viewing CAD diagrams – something that can be easily achieved with the free viewer software.
If Gartner’s forecasts are correct, a significant proportion of business applications will be accessed as cloud-based subscription services. Witt said IT departments must start to take back control.
“This is about cloud control and regulations like GDPR [General Data Protection Regulation] and PCI [Payment Card Industry Data Security Standard],” he added. The business needs to be aware where customer data is being stored. Unauthorised cloud services pose a regulatory compliance risk for business. IT must also be involved in the joiners and leavers HR process to make sure cloud subscriptions are set up for new staff and relinquished when employees or contractors leave.
Read more about cloud IT management
- As IT departments prepare their 2019 budgets, we assess how to avoid paying too much for cloud services.
- Enterprises are increasingly moving their virtual workloads to the cloud for ease of management, but cost savings remain elusive for many, says Druva.