451 Research is an excellent resource when it comes to measuring and analyzing trends in the IT infrastructure and services arena.
The report below, by analyst Carl Brooks, outlines the current state of the cloud and outsourcing market.
Emphasis in red added by me.
Brian Wood, VP Marketing
New data shows a continued surge in buying infrastructure services
Corporate buying data and survey research about the sentiment in IT shops show that cloud computing – infrastructure as a service (IaaS), software as a service (SaaS) and platform as a service (PaaS) – continues to grow strongly. External, third-party providers like salesforce.com and Amazon Web Services (AWS) are targets for enterprise cash, and internal reorganization for the IT organization to more closely resemble on-demand service delivery (i.e., private cloud) is becoming a mainstream project, and it influences software buying decisions. Enterprises are quite decisively ‘doing cloud’ now and the trend (and the money spent) is only going up.
Almost since the moment it was conceived as a commercial notion, IaaS and cloud computing generally have been pitched to the enterprise. That’s natural: the enterprise is the largest segment of every sector of the IT market and what better place to make the business case for selecting out repetitive, commonplace and non-remunerative tasks in provisioning IT and replacing it with streamlined, automated delivery? Robust, adaptable and above all easy IT infrastructure at the fingertips of enterprise should have been an easy sell. Sun banked on that notion way back in 2003, delivering on-demand servers at $1/hour, half a decade before Amazon Web Services was a hit. However, it’s taken until now or at least the middle of last year, when cloud uptake went over 30%, to say that is true.
ChangeWave Research, a service of 451 Research, recently found that despite economic and political uncertainty that dragged down growth overall, cloud buying continues to rise. The Continued Momentum for Public, Private and Hybrid Cloud report shows that 40% of all corporate entities surveyed were using cloud computing services, an 18% rise from last year and 6% from last quarter’s data.
At the present trajectory, a majority of US companies will be consuming cloud computing in some form or another by the end of the year. The famous fourth quarter blues for tech products and services can be assumed here as well, meaning growth may go faster than this data indicates as buyers pick up their budgets again for 2013. Moreover, 42% of those companies buying cloud plan to increase their spending this year, and only 3% plan to decrease it.
Application services delivered via the browser (SaaS) remain the most popular choice for obvious reasons, with 68% of the cloud share, 40% went to IaaS, 30% went to PaaS and 4% to ‘other.’ For platform providers, Microsoft, salesforce.com, Google and VMware were the leading vendors – for IaaS, it was AWS and Rackspace, with AWS in the lead by a large margin. Other highlights showed a continuing emphasis and interest on mobile for cloud services and that security concerns remain the perennial concern for companies that choose not to use external IT services.
TheInfoPro, a service of 451 Research, provides in-depth insight and analysis based on interviews with IT buyers. It recent Market Dynamics Report – Cloud Computing Wave 4 shows a continuing emphasis on internal IT operations being reimagined and reorganized into cloud-style delivery. Basic infrastructure is the main concern, with 47% of interviewees saying that internal IaaS was the top priority and developing internal SaaS/PaaS platforms bring in about 20% each.
Enterprises are also largely conservative about which workloads they think are ready or will be ready to move to external infrastructure: 41% said that less than 25% of applications were ready now, and 27% said those applications would be ready in 3 years. Furthermore, 10% of respondents said that 91-100% of their apps would be suitable for public cloud in 3 years. Thus, 10% of the enterprise constitutes the ripest opportunity for providers. TIP found that the use of public IaaS was set to grow the fastest. Security was, naturally, the primary concern for over 90% of enterprise buyers.
This data shows broad agreement on the trend from the outside, categorizing spending on cloud, and the inside, categorizing the priorities of the enterprise around cloud computing right now. It’s worth noting that adoption of more traditional IT service vendors is already over 50% or higher. This is colocation, managed hosting and managed IT services, and IT outsourcing, which do not see the same rates of growth right now as cloud, but remain very comfortably positioned to grow. Cloud is yet another wave of this trend and the one that will have the broadest impact over time.
The 451 Take
While all of this spells good news, it’s important to remember that cloud is a small part of the enterprise dollar; we’ve not yet arrived at the utopian ideal of all IT delivered from hyper-efficient, hyper-scale resource pools there for the taking, and we may never. But the macro trends are clear – IaaS and SaaS are going to be dominant points of entry for new infrastructure services for quite some time and the hosting market is going to conform more and more toward those models. It’s clear that for 2013 and probably longer, cloud remains an area of very strong growth for providers, but for enterprises the focus is strongly on internal improvements. Providers that can help enterprises enable this transition stand to benefit.