There’s little question that cloud computing is growing like gangbusters, but it’s not always obvious how that growth fits into the larger scheme of enterprise IT strategies and spending. Some new numbers from International Data Corp. help put the cloud’s growth in perspective, especially in relation to more traditional technology approaches.
According to IDC’s latest assessment of the Worldwide Cloud IT Infrastructure Market, the percentage of total IT infrastructure spending—defined as server, storage, and Ethernet switch revenue—devoted to the cloud represented almost a third of total IT infrastructure spending in the first quarter of 2015. Just as important, IDC also predicted that the cloud would gobble up almost half of the IT infrastructure market by 2019. What makes the numbers even more striking is that IDC predicted the public cloud will see the lion’s share of this growth.
Inside the numbers
For the first quarter of 2015, cloud infrastructure spending was nearly 30% of the total, IDC said, up from 26.4% in the same period in 2014. Sales of IT infrastructure for the public cloud grew 25.5% to $3.9 billion while sales of private cloud infrastructure did almost as well, growing 24.4% to $2.4 billion. Non-cloud IT infrastructure, meanwhile, rose just 6.1% primarily driven by server sales. Non-cloud Ethernet switch sales rose a measly 1% and storage sales fell.
Despite the tricky business of determining how much infrastructure vendor revenue should be allocated to private cloud vs. non-cloud enterprise spend, IDC is bullish on investments designed to “modernize their IT for the 3rd Platform, begin to deploy next-gen software solutions, and embrace modern management processes that enable agile, flexible, and extensible cloud platforms,” said Kuba Stolarski, IDC’s research manager of server, virtualization, and workload research, in a statement.
IDC’s long-range predictions are even more dramatic, calling for cloud IT infrastructure spending to grow 15.6% a year, topping $54.6 billion in 2019. While cloud spending grows, on-premise IT spending will contract by 1.4% a year over the same period, IDC said. At that point, cloud IT infrastructure spending will account for 46.5% of the total IT infrastructure market.
The cloud isn’t just for unicorns
As IDC notes, the huge amount of money being poured into cloud infrastructure figures indicates huge demand for cloud applications and services. That’s long been the case for many “born-in-the-cloud” startups and unicorns, and we believe that this kind of growth will include significant numbers of large, traditional enterprises also seeking to take advantage of the ever-increasing power and speed of cloud solutions.
Natalya Yezhkova, IDC research director of storage systems, explained the trends in a statement:
“The breadth and width of cloud offerings only continue to grow, with an increasing universe of business- and consumer-oriented solutions being born in the cloud and/or served better by the cloud. This growing demand from the end user side and expansion of cloud-based offerings from service providers will continue to fuel growth in spending on the underlying IT infrastructure in the foreseeable future.”
That demand is supported by many other studies. The Cloud Grows Up, a recent study conducted by Oxford Economics and SAP, for example, reveals the finding that nearly 70% of enterprises expect to make moderate-to-heavy cloud investments over the next three years as they migrate core business functions to the cloud.
Critically, the Oxford study shows cloud isn’t just streamlining existing enterprise processes, it’s also helping to enable growth and expansion. The study notes that 43% of businesses already expect the cloud to boost top-line growth, and a whopping 58% think it will do so within three years. The study also said that while 44% of businesses now rely on cloud computing to launch new business models, that figure will rise to 55% in three years.
In fact, despite continually decreasing cloud costs, CIO magazine recently argued that the biggest benefits come from the cloud’s “transformative potential for faster, more agile development and furthering the business objectives of the enterprise.” No wonder cloud companies are buying so much equipment!