As spending shifts from traditional systems to cloud services, there is both great risk and opportunity.
Through 2020, an increasing percentage of annual IT spending will be directly or indirectly impacted by a cloud shift, making cloud computing one of the most disruptive forces in IT markets since the early days of the digital age.
When organizations are faced with IT spending decisions, the consideration of using cloud services for new initiatives, or to replace existing systems, causes a shift in spending from traditional IT solutions to cloud. This results in the cloud shift, and it is happening more often due to a “cloud-first” direction most organizations take when making IT spending decisions.
Cloud shift is not just about cloud.
“This cloud-first orientation will continue to increase the rate of cloud adoption and, consequently, cloud shift,” said Ed Anderson, research vice president. “The rate of cloud shift will be different based on the dynamics of each market segment.”
For example, Gartner’s latest IT spending forecast shows that spending on data center systems is forecast to be $175 billion in 2017, growing to $181 billion through 2020. In contrast, spending on cloud system infrastructure services (IaaS) will grow from $34 billion in 2017 to $71 billion through 2020. By the end of 2020, spending on IaaS will equate to 39 percent of total spending on data center systems.
“Cloud shift is not just about cloud. As organizations pursue new IT architectures and operating philosophies, they become prepared for new opportunities in digital business, including next-generation IT solutions such as the Internet of Things (IoT),” said Mr. Anderson. “Organizations embracing dynamic, cloud-based operating models position themselves for cost optimization and increased competitiveness.”
For these reasons, technology and service providers must be aggressive in recognizing and exploiting IT spending shifts to capture the revenue opportunities of the future — and manage revenue of the past.
Cloud shift is not necessarily inevitable, but trends indicate a preference for cloud services in most situations.
“Providers of all types must ensure they remain vigilant and proactive in pursuing new cloud-related growth opportunities, while divesting businesses that will become materially impacted by cloud shift,” said Mr. Anderson. “Providers that do not manage this change aggressively and proactively will become victims of cloud shift and diminish their ability to compete for the new cloud-based solution opportunities.”
Cloud shift represents both risk and opportunity. During this period of market disruption, strategic planners should carefully watch the impact of cloud shift on traditional businesses. Cloud shift is not necessarily inevitable, but trends indicate a preference for cloud services in most situations.