Cloud Shift Will Affect More Than $1 Trillion in IT Spending

IT Asset Managers Must Identify Risks and Opportunities and Adjust Vendor Management Styles

Bangalore, India: More than $1 trillion in IT spending will be directly or indirectly affected by the shift to cloud during the next five years, said Gartner, Inc. This will make cloud computing one of the most disruptive forces of IT spending since the early days of the digital age.

"Cloud-first strategies are the foundation for staying relevant in a fast-paced world," said Ed Anderson, research vice president at Gartner. "The market for cloud services has grown to such an extent that it is now a notable percentage of total IT spending (see Table 1), helping to create a new generation of start-ups and "born in the cloud" providers."

Note: BPaaS = business process as a service; BPO = business process outsourcing; CSP = communications service provider; IaaS = infrastructure as a service; ITO = IT outsourcing; PaaS = platform as a service; SaaS = software as a service.
Source: Gartner (July 2016)

IT spending is steadily shifting from traditional IT offerings to cloud services (cloud shift). The aggregate amount of cloud shift in 2016 is estimated to reach $111 billion, increasing to $216 billion in 2020. Cloud shift rates are determined by comparing IT spending on cloud services with traditional noncloud services in the same market categories (see Table 1).

Table 1. Cloud Shift Summary by Market Segment

Legacy Segment	Cloud Segment	Total Market Size in 2016	Total Cloud Shift in 2016	Cloud Shift Rate Through 2020
Business Process Outsourcing	BPaaS	$119 billion	$42 billion	43%
Application Software	SaaS	$144 billion	$36 billion	37%
Application Infrastructure Software	PaaS	$177 billion	$11 billion	10%
System Infrastructure	IaaS	$294 billion	$22 billion	17%
BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service

Source: Gartner (July 2016)

In addition to the direct effects of cloud shift, many markets will be affected indirectly. Identifying indirect effects can help IT asset and purchasing managers ensure they are getting the best value out of new expenditure and are protected against risk, as well as assisting them to exploit the new opportunities caused by cloud shift.

For example, instead of buying operating systems (OSs) for each user in the traditional way, many will be provided as OS images — particularly with the use of containers for next-generation applications. Another example is 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.

"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," said Mr. Anderson. "Furthermore, organizations embracing dynamic, cloud-based operating models position themselves better for cost optimization and increased competitiveness."

by 2020: Gartner