Inside Advanced Scale Challenges|Thursday, February 21, 2019
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‘Cloud Shift’ Gains Momentum, Spending Surge Seen 

So-called "cloud first" strategies are expected to propel IT spending over the next five years as more enterprises transform themselves into digital businesses, a new forecast predicts.

In a cloud spending survey released Thursday (July 21), market watcher Gartner Inc. (NYSE: IT) estimated that the cloud transition underway for several years would influence more than $1 trillion in IT spending through 2020. That seismic shift, Gartner asserted, makes cloud computing "one of the most disruptive forces of IT spending since the early days of the digital age."

As the "cloud-native" movement around distributed applications and other IT infrastructure gains momentum, Gartner estimates the aggregate total of what it refers to as "cloud shift" spending will reach an estimated $111 billion this year, nearly doubling to $216 billion by 2020. Hence, the market for cloud services now represents a "notable percentage of IT spending, helping to create a new generation of startups and 'born in the cloud' providers," Gartner researcher Ed Anderson noted in a statement releasing the cloud forecast.

Growing demand for enterprise software, datacenter and other IT services is fueling the surge in public and private cloud services spending as enterprises embrace the "as-a-service" model for software, platforms, infrastructure and business processes along with management and security. Among the "influencers" of the building cloud shift, Gartner said, are operating systems—many of them increasingly based on open source projects like OpenStack—and virtualization along with datacenter storage, networking and servers (mostly x86-based) as well as IT services such as hosting and colocation.

In the case of enterprise operating systems, Gartner predicts the traditional means of delivery of enterprise operating system will switch to OS images. The streamlined delivery mode is expected to accelerate with the embrace of IT micro-services such as secure containers used to delivering next-generation distributed applications. Too, cloud-based storage is seen as outpacing dedicated hardware in terms of upfront cost and scale.

Meanwhile, business process outsourcing is seen as the biggest driver of the cloud shift over the next five years, accounting for an estimated 43 percent of the shift in IT spending through the end of 2020. Application software delivered via software-as-a-service platforms is expected to account for 37 percent of the massive shift to the cloud, Gartner reckons.

"Organizations embracing dynamic, cloud-based operating models position themselves better for cost optimization and increased competitiveness," Gartner's Anderson counseled.

The findings are at least partially borne out by recent IT industry financial results. For example, Microsoft (NASDAQ: MSFT) reported earlier this week that strong growth for its Azure cloud business lifted quarterly revenue above Wall Street estimates. Microsoft said Azure revenues spiked 102 percent during the previous quarter. The company's cloud revenue jumped more than $4 billion on an annual basis to $12.1 billion in cloud-related revenue, the company reported.

Hence, Microsoft and public cloud leader Amazon Web Services (NASDAQ: AMZN) are expected to enjoy strong annual growth delivering enterprise cloud services over the next few years, analysts said.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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