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Why cloud disruption will shift the dynamics of IT budgets

Cloud computing is set to become one of the most disruptive forces of IT spending since the dawn of the digital age

From 2016 through 2020, more than $1tn in compounded IT spending will be directly or indirectly affected by a shift in spending to cloud-based services, according to analyst Gartner.

Ignoring the cloud or not having a cloud strategy will not be an option for CIOs.

According to Gartner, more than 30% of the 100 largest suppliers’ new software investments will have shifted from cloud-first to cloud-only by 2019.

Gartner believes cloud-first in software design and planning is gradually being augmented or replaced by cloud-only. This also applies to private and hybrid cloud scenarios.

“More leading-edge IT capabilities will be available only in the cloud, forcing reluctant organisations closer to cloud adoption,” said Yefim Natis, vice-president and Gartner fellow.

“While some applications and data will remain locked in older technologies, more systems will be cloud-based, further increasing demand for integration infrastructure.

“Rigid organisations cannot produce agile IT systems. As delivery shifts more to the cloud, most IT organisations will have to reorganise to reflect the business realities of cloud computing: Continuous innovation and change, pervasive integration, competing with cloud providers for some initiatives and crucial prevalence of influence over control in IT’s relationship with lines of business.

“While historically the greatest competitor to external service providers has been internal IT – with spend shifts, structural reorganisations and the business realities mentioned above – cloud providers will be in the position to gain the upper hand,” he said.

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Organisations that have used cloud for a number of years have seen the benefits of moving more IT into the public cloud.

When Computer Weekly spoke to News Corp’s global CIO Domini Shire in May 2016, he said he expected cloud services would play a major role in the future of IT at News Corp.

“It does seem likely that our next generation of network will not be an MPLS wide area network,” he said. “It is going to be a beefed-up internet approach to connectivity across the organisation.”

According to Gartner’s Market Insight: Cloud Shift report, by 2020, the biggest growth market for cloud will be in cloud-based business processes, where $42bn, will be spent in cloud services, representing 43% of the $113bn market.

In the $144bn application software market, SaaS is expected to grow 37% to $38bn by 2020, according to Gartner. When combined, these two market sectors represent $80bn of cloud-based spending.

Jeffrey Mann, research vice-president at Gartner, said: “Cloud will increasingly be the default option for software deployment. The same is true for custom software, which increasingly is designed for some variation of public or private cloud.”

Peterborough: Running on Salesforce

Saas looks like a logical choice for many organisations migrating away from legacy systems. One example is Peterborough City Council, which is hoping to expand its use of Salesforce, as more SaaS applications become available on the platform.

In a recent interview with Computer Weekly, the council’s head of IT Richard Godfrey explained how SaaS applications would enable Peterborough to pool data, with Salesforce customer relationship management (CRM) holding the master data.

Creating a master record that all applications can reference is a big challenge for IT departments. The majority of enterprise systems have their own databases, which can lead to data inconsistencies.

As a consequence, organisations are unable to make the best use of common information across systems, such as sharing a customer records between CRM, order processing and help desk.

Peterborough City Council, for instance, is looking at how to use Salesforce to hold master records, which would enable it to avoid the major expense of integrating legacy systems.

Datacentre spending is likely to be split between on-premise, hybrid and pure cloud-based IT. By 2020, Gartner estimates IaaS and PaaS spending is set to grow to $33bn, but this will represent 27% of overall IT infrastructure and platform spending.

Thomas Bittman, vice-president and distinguished analyst at Gartner, said: “Unless very small, most businesses will continue to have an on-premises – or hosted – datacentre capability.”

“But with most compute power moving to IaaS providers, organisations and suppliers need to focus on managing and leveraging the hybrid combination of on-premises, off-premises, cloud and non-cloud architectures, with a focus on managing cloud-delivered capacity efficiently and effectively,” he said.

Read more on Software-as-a-Service (SaaS)