Gartner: Accelerated Move to Public Cloud to Overtake Traditional IT Spending in 2025
Enterprise IT spending on public cloud computing, within addressable market segments, will overtake spending on traditional IT in 2025, according to Gartner, Inc.
Gartner’s ‘cloud shift’ research includes only those enterprise IT categories that can transition to cloud, within the application software, infrastructure software, business process services and system infrastructure markets. By 2025, 51% of IT spending in these four categories will have shifted from traditional solutions to the public cloud, compared to 41% in 2022. Almost two-thirds (65.9%) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.
“The shift to the cloud has only accelerated over the past two years due to COVID-19, as organizations responded to a new business and social dynamic,” said Michael Warrilow, research vice president at Gartner. “Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.”
In 2022, traditional offerings will constitute 58.7% of the addressable revenue (see Figure 1), but growth in traditional markets will be much lower than cloud. Demand for integration capabilities, agile work processes and composable architecture will drive continued shift to the cloud, as long-term digital transformation and modernization initiatives are brought forward to 2022. Technology product managers should use the cloud shift as measure of market opportunity.
In 2022, more than $1.3 trillion in enterprise IT spending is at stake from the shift to cloud, growing to almost $1.8 trillion in 2025, according to Gartner. Ongoing disruption to IT markets by cloud will be amplified by the introduction of new technologies, including distributed cloud. Many will further blur the lines between traditional and cloud offerings.
Enterprise adoption of distributed cloud has the potential to further accelerate cloud shift because it brings public cloud services into domains that have primarily been non-cloud, expanding the addressable market. Organizations are evaluating it because of its ability to meet location-specific requirements, such as data sovereignty, low-latency and network bandwidth.
To capitalize on the shift to cloud, Gartner recommends technology and services providers target segments where the shift is occurring most aggressively, in addition to seeking new high-growth cloud opportunities. For example, infrastructure-related segments have a lower level of cloud penetration and are expected to grow faster than segments such as enterprise applications that are already highly penetrated. Providers should also target specific personas, adoption profiles and use cases with go-to-market initiatives.
*Note to editors: Gartner’s research on cloud shift provides a high-level view of the market impact of cloud computing by measuring the ratio of enterprise IT spending on public cloud services compared with traditional (non-cloud) for a given set of market segments. It compares only those markets where cloud is a meaningful trend that can be exploited by technology providers. It excludes consumer spending and markets that cannot transition to cloud, for example, mobile devices.
More detailed analysis is available to Gartner clients in the report “Market Impact: Cloud Shift — 2022 Through 2025.” More information on cloud trends is available in the Gartner webinar “The Gartner Hype Cycle for Cloud Computing.”
Telcos Move to Public Cloud:
Dish Network is perhaps the poster child for this shift, with its ambitious plan to deploy its greenfield 5G network on Amazon Web Services (AWS). After a few delays, the big switch-on is expected to begin this year. Similarly, AT&T struck a deal last June to migrate its 5G network onto Microsoft Azure. Verizon is also using Azure, in this case to underpin its private mobile edge cloud service. North of that particular border, Bell Canada in July inked a deal to migrate various critical workloads – including IT, network functions and applications – to Google Cloud. It came less than two months after Bell teamed up with AWS to overhaul its business and consumer applications, as well as offer AWS-powered multi-access edge computing (MEC) services.
More recently, Telenor expanded its partnership with Amazon to jointly offer 5G and edge services to various industry verticals. In short, more and more telcos are coming to the conclusion that hyperscale public cloud offers a ready-made route for them, not just to address the enterprise IT market, but to also make their own networks cloud native.
References:
Public cloud forecast to account for majority of IT spending by 2025
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Synergy Research Group (SRG) and Canalys reported total cloud market spending surpassed $50 billion for the fourth quarter, marking an all-time high. That’s a 36% year-over-year jump in cloud spending from last year, according to SRG. Those figures were backed up by similar reporting from Canalys, which tracked a 34% year-over-year increase.
Total cloud spending hit $191.7 billion in 2021, a 35% increase from 2020, Canalys reported. Meanwhile, SRG tracked $178 billion in cloud spending, up 37% during the same period.
“It is a strong testimony to the value and attractiveness of cloud services that the 2021 market growth rate actually exceeded 2020 growth, despite the enormous scale that has already been achieved. Enterprises are now spending twice as much on cloud services as they spend on their own data centers,” Dinsdale said.
AWS’ market share stayed constant at 33%, while Microsoft and Google held onto their N0. 2 and No. 3 spots with 21% and 10%, respectively, SRG reported. Meanwhile, Alibaba, IBM/Kyndryl, Salesforce, Tencent, and Oracle followed the major cloud providers, collectively accounting for about 18% of the market. The final tier of providers included China Telecom, China Unicom, Huawei, Fujitsu, NTT, Rackspace, and SAP, with each claiming about 1% market share.
Although the leaderboard hasn’t changed much in recent years, SRG chief analyst John Dinsdale wrote “the battle for market share is getting more interesting.”
And while Amazon grew faster than the market at large, a fact that helped the provider maintain a significant lead, Microsoft, Google, and Alibaba all grew faster than Amazon, according to Dinsdale
Microsoft has gained almost 9 percentage points since 2017, boosting the cloud provider to a 21% market share, and putting it 11 percentage points behind Amazon.
As the cloud giants’ market shares have grown, they’ve left little room for smaller rivals.
“Google and Alibaba also continue to grow market share, while in aggregate the long tail of small-to-medium sized cloud providers see revenues growing steadily but market shares declining,” Dinsdale said. “The rising tide continues to lift all boats, but some are being lifted more swiftly than others.”
References:
https://canalys.com/newsroom/global-cloud-services-Q4-2021
https://www.srgresearch.com/articles/as-quarterly-cloud-spending-jumps-to-over-50b-microsoft-looms-larger-in-amazons-rear-mirror
https://www.sdxcentral.com/articles/news/amazon-bests-microsoft-google-in-cloud-market-battle/2022/02/