$1 trillion in IT spending to be ‘affected’ by the cloud

Gartner analyst: In the next few years, a ‘shift to cloud’ will become ‘one of the most disruptive forces of IT spending since the early days of the digital age.’

$1 trillion in IT spending to be ‘affected’ by the cloud

IT is moving to the cloud big time, says research and consulting firm Gartner. And while we’ve been aware of that for a while, the firm has also been coming up with some staggering corroborating numbers.

It says that by 2020, $1 trillion in IT spending will be “affected” by the shift to cloud. That’s roughly a little under a third of all IT spending, which in 2015 was $3.41 trillion globally and is projected to be $3.79 trillion in 2020, according to Gartner’s Q2 2016 forecast, published earlier this month.

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Enterprise software, data center systems and IT services are all headed cloud-ward, and the displacement “will make cloud computing one of the most disruptive forces of IT spending since the early days of the digital age,” says Ed Anderson, research vice president at Gartner, in the firm's press release.

A cloud-first approach

More important, the firm says IT-industry stakeholders need to take note and develop cloud-first strategies to stay relevant.

Traditional business process outsourcing (BPO) is seeing the biggest veer. Its total market size in 2016 is projected at $119 billion. Of that, $42 billion will “shift” to the cloud in 2016, making what Gartner calls a Cloud Shift Rate of 43 percent through 2020.

Gartner defines its Cloud Shift Rate as being a comparison of the spend on cloud services with the amount spent on traditional IT services in the same market genre, such as BPO, for example.

BPO is the outsourcing of business processes, such as back-office accounting, to a third party. BPO transfers to the cloud genre business process as a service (BPaaS).

Gartner also breaks down other IT sub-markets.

The classic application software market will shift to software as a service (SaaS) at a 37 percent Cloud Shift Rate through 2020. That IT genre has a total market size of $144 billion this year, with $36 billion transitioning to cloud this year.

Less pronounced, but also shifting to the cloud nonetheless, is system infrastructure with a Cloud Shift Rate to 2020 of 17 percent. It derives from a $294 billion market this year, with $22 billion going cloud-ward into infrastructure as a service (IaaS).

Application infrastructure software tails the leaders with a comparatively strong $177 billion of IT spend this year, but with only $11 billion, or 10 percent, being wrung into cloud through 2020.

The benefits of cloud

Gartner warns that IT buyers and asset executives must become aware of this industry change.

That includes taking advantage of it. Benefits can include cheaper operating system images instead of traditional delivery mechanisms. Containers save money, in part, due to efficiencies and version control, for example.

Other cloud savings can be obtained by negotiating to pay only for what one uses.

"Cloud shift is not just about cloud,” Anderson says in the release. He means that every cloud has a silver lining and that one should embrace the change, using it for growth generation. Opportunities may well abound for some. New digital businesses “including next-generation IT solutions such as the Internet of Things” are fresh hunting grounds.

And indeed, IoT spending now makes up 24 percent of IoT budgets, according to a recent IoT-oriented report.

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Copyright © 2016 IDG Communications, Inc.