Cloud increasingly eating enterprise IT spend: Gartner

Almost 30 percent of spending in key enterprise IT markets is expected to shift to the cloud by 2022, according to research from Gartner.

The research firm said spending on cloud-based offerings would grow faster than in traditional, non-cloud IT offerings at 28 percent in 2022, up from 19 percent this year.

However, traditional offerings will still constitute 72 percent of the addressable revenue in the same year, despite the level of growth.

“The shift of enterprise IT spending to new, cloud-based alternatives is relentless, although it’s occurring over the course of many years due to the nature of traditional enterprise IT,” Gartner research vice president Michael Warrilow said.

“Cloud shift highlights the appeal of greater flexibility and agility, which is perceived as a benefit of on-demand capacity and pay-as-you-go pricing in cloud.”

Gartner estimates that more than US$1.3 trillion in IT spending will be directly or indirectly affected by the shift, and that providers that are able to capture the growth will drive long-term success through the next decade.

Specifically, Gartner advises that providers should assess growth rates and addressable market size opportunities in system infrastructure, infrastructure software, application software and business process outsourcing.

“The shift to cloud until the end of 2022 represents a critical period for traditional infrastructure providers, as competitors benefit from increasing cloud-driven disruption and spending triggers based on infrastructure asset expiration,” Warrilow said.

“As cloud becomes increasingly mainstream, it will influence even greater portions of enterprise IT decisions, particularly in system infrastructure as increasing tension becomes apparent between on- and off-premises solutions.”

Prior to this year, Gartner said the largest shift to cloud happened with application software, particularly driven by CRM. Today, CRM spending is higher in cloud than in traditional software and will continue to expand to cover other application software segments, including office suites, content services and collaboration services.

Gartner added that almost half of revenue in 2022 will be in system infrastructure and infrastructure software, with the former expected to shift the fastest between now and 2022 as current assets reach renewal status.

Currently, system infrastructure represents the market with the least amount of cloud shift, due to prior investments in data centre hardware, virtualisation and data centre operating system software and IT services, which Gartner said are often considered costly and inflexible.