The Impact of Cloud Shift on IT Markets

Through 2022, growth in enterprise IT spending for cloud-based offerings will be faster than growth in traditional (non-cloud) IT offerings, making cloud computing one of the most disruptive forces in IT markets since the early days of the digital age.

When organizations are faced with IT spending decisions, the consideration of using cloud services for new initiatives or replacing existing systems causes a shift in spending from traditional IT solutions to cloud. This results in an effect we call cloud shift, and it is happening more often due to a “cloud-first” preference most organizations take when making IT spending decisions.

This cloud-first orientation increases the rate of cloud adoption and, consequently, cloud shift. The rate of cloud shift varies slightly based on the dynamics of each market segment.

For example, Gartner’s latest IT spending forecast shows that spending on data center systems is forecast to be $195 billion in 2019, but down to $190 billion through 2022. In contrast, spending on cloud system infrastructure services (IaaS) will grow from $39.5 billion in 2019 to $63 billion through 2021.

Cloud shift is not just about cloud. As organizations pursue new IT architectures and operating philosophies, they put in place a foundation for new opportunities in digital business, including next-generation IT solutions such as the Internet of Things (IoT). Organizations embracing dynamic, cloud-based operating models position themselves for cost optimization and increased competitiveness.

For these reasons, technology and service providers must be aggressive in recognizing and exploiting IT spending shifts to capture the revenue opportunities of the future — and manage the revenue of the past.

Providers of all types must ensure they remain vigilant and proactive in pursuing new cloud-related growth opportunities, while divesting businesses that will become materially impacted by cloud shift. Providers that do not manage this change aggressively and proactively will become victims of cloud shift and diminish their ability to compete for new opportunities.

As cloud becomes increasingly mainstream through 2022, it will dominate ever-increasing portions of enterprise IT decisions.

Cloud shift represents both risk and opportunity. As cloud becomes increasingly mainstream through 2022, it will dominate ever-increasing portions of enterprise IT decisions.

By Ed Anderson, Distinguished Vice President Analyst, Gartner