Spending on enterprise IT segments worldwide is growing at expected levels and is in line with expected global economic growth. Earlier this year, the leading analyst firm Gartner forecasted that global IT spending will grow 6.2% in 2018 to reach $3.7 trillion. This is the highest annual growth rate that Gartner has forecasted since 2007.
With its new research “Market Insight: Cloud Shift — 2018 to 2022”, Gartner states that enterprises will shift 28% of their IT spending to cloud by 2022.
Enterprise IT spending: Market Insight
According to Gartner, the enterprise IT spending on cloud-based services will grow faster than the spending in traditional and non-cloud IT services.
Instead of the rapid growth, the enterprises will continue to spend on traditional IT offerings which will account for 72% of the addressable revenue in 2022.
“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,” said Michael Warrilow, research vice president at Gartner.
“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.”
Main cloud-shift categories
The main IT segments shifting to cloud in future include system infrastructure, infrastructure software, application software, and business process outsourcing.
System infrastructure currently represents the market with the least amount of cloud shift. However, the prior investments in data center hardware, virtualization and data center operating system software and IT services will drive its shift to cloud.
Gartner forecasts that the system infrastructure category is expected to witness the fastest shift to cloud between 2018 and 2022, as current assets reach renewal status.
Moreover, system infrastructure and infrastructure software will drive around one-half of the addressable revenue by 2022.
Before 2018, the largest shift to cloud in application software was specifically driven by customer relationship management (CRM). Today, a higher proportion of CRM spending occurs in cloud as compared to traditional software.
Gartner mentioned that this trend will continue to expand and cover the additional application software segments like office suites, content services and collaboration services. Application software segment is expected to retain the highest proportion of cloud shift the forecast period.
Market opportunity for technology providers
The shift to cloud will open a door for technology providers to new market opportunities. They can assess growth rates in the main cloud-shift categories and market size to make the most of enterprise IT shift to cloud.
Further, over $1.3 trillion in IT spending will be directly or indirectly affected by the shift to cloud by 2022. Technology providers that better capture this growth opportunity are likely to drive long-term success over the next few years.
“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,” said Mr. Warrilow.
“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.”
Image source: Gartner