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How The Cloud is shaping global IT spending patterns


Cloud technology is a truly wonderful thing, but if you’ve been thinking “sounds great in theory, but does anybody actually use it?”, the answer is a resounding yes! By way of evidence, we’ve been looking at the snappily titled ‘Forecast Alert: IT Spending, Worldwide, 2Q16 Update’ from Gartner, which reveals some interesting cloud-related trends.

Data Centre System spend is slowing

The overall growth rate for data centre systems in 2016 has reduced from 4% to 3.2%. This includes spending decreases across storage, enterprise network equipment (1.3% reduction), and servers.

One of the key benefits of cloud technology is the reduction in requirement for in-house infrastructure, minimising or even eliminating the need for businesses’ own data centres. An increase in businesses migrating to the cloud would explain this trend of reduction in data centre systems.

Virtualisation plays a role here too – cloud providers make heavy use of virtualised systems to increase the utilisation efficiency of their own hardware. However, even businesses which retain in-house servers, or operate a hybrid private-public cloud infrastructure, are increasingly adopting virtualisation for both increased efficiency and improved disaster recovery. In both cases, this increased efficiency of hardware utilisation is driving a reduction in the data centre system spend category.

Enterprise software spend is on the rise

More precisely, the enterprise software market is predicted to grow by 7% in 2016, an increase of 1.2% from the previous forecast. This is driven is large part by the increased uptake of cloud software, and it’s fair to say that a significant portion of that will be from Microsoft Office 365, with their somewhat… divisive… subscription-based licensing model.

Of particular note are companies within Asia’s emerging economies, which are ‘sidestepping’ on-premises office suites, and exclusively operating with cloud office technologies. An interesting parallel perhaps for the telecommunications industry in Africa, which largely bypassed fixed landlines, and moved straight to mobile.

Demand for IT services is growing

Migrating local infrastructure to the cloud brings many benefits, but is also a substantial undertaking. Thankfully, businesses seem to be taking the sensible precaution of hiring experts to help them make the transition smoothly, which explains the anticipated growth in IT services spend from 3.8% to 4.7%.

Drilling down into the IT services category, the big winner is consulting services, which grew by an impressive 9.7% in 2015, and has an anticipated 2016 growth of 8.3% (an increase from 6.1% in the previous forecast). More modest is the growth in implementation services, from 2.6% to 2.9%. These figures make sense in the context of cloud adoption, because hosted cloud solutions do not need much implementation work (users should just be able to log in via a web browser), whereas they do require a lot of planning (i.e. consulting) to determine the optimal cloud strategy for each company and how to handle the migration.

The increase in IT outsourcing spend from 5.1% to 5.6% indicates that greater exposure to, and confidence in, cloud technology is making companies feel more comfortable about completely outsourcing their business functions.

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