Oct 10 2016

Businesses Likely to Boost Cloud Spending in 2017, Spiceworks Survey Says

SMBs will likely stick with older IT systems but may need to upgrade legacy software, according to a Spiceworks analyst.

Businesses are likely to have flat IT budgets for 2017 but are expected to boost investments in cloud services, according to a survey released by Spiceworks, a professional network for IT workers. Small and medium-sized businesses are largely expected to hang onto older IT services and hardware but could be forced to upgrade out-of-date software next year, a Spiceworks analyst says.

In its 2017 State of IT report, Spiceworks notes that IT professionals plan to spend a majority of their 2017 IT budgets on hardware and software, as has been the case in the past. However, the budget for hardware and software is expected to decrease by 2 percentage points year-over-year, to 35 and 29 percent, respectively. IT budget allocations for managed service projects will also slightly decrease, by 1 percentage point to 12 percent.

Yet the survey found that 17 percent of IT budgets will be spent on hosted and cloud-based service projects in 2017, a 3 percentage point increase in budgets from 2016. Further, 38 percent of IT professionals also said cloud and hosted services are “very or extremely important” to their current business practices, compared to 29 percent last year.

Spiceworks conducted the survey this summer, compiling data from 886 respondents from North America and Europe, the Middle East and Africa. The respondents represent a variety of company sizes (SMBs as well as enterprises) and come from a variety of industries, including manufacturing, healthcare, nonprofits, education, government, and finance.

The survey data was supplemented with Spiceworks network data collected in September 2016, based on anonymized, aggregated deployment data from IT professionals across the globe that use Spiceworks to inventory their organization’s notebooks, desktops, software, operating systems and more.

Cloud Spending Expected to Increase

Why is cloud investment expected to increase? Peter Tsai, an IT analyst at Spiceworks, says that IT professionals in general are becoming “more comfortable with trusting cloud services.” He adds that “a lot of them are getting better and it’s just becoming the norm.”

For 2017, the Spiceworks survey found that IT pros will use the cloud primarily for email, online backup and recovery, web hosting and productivity solutions.

Tsai acknowledges that SMBs “aren’t always using the cutting-edge stuff” when it comes to IT and often “have to do make do with what they have.”

Many are holding on to older operating systems and hardware that they have already paid for, he says, but are seeing cloud services that are coming down in price and may be more cost-effective. “Cost is always a factor in the SMB market,” he says, and prices are dropping.

Cloud providers are also making new kinds of software and features available to SMBs, including end-to-end encryption and ones that help SMBs meet compliance standards for the Health Insurance Portability and Accountability Act (HIPAA) and Health Information Technology for Economic and Clinical Health Act.

IT leaders and managers are also pondering how they can use cloud to drive down capital expenses, Tsai says, including data storage, for example. He notes that by taking advantage of Infrastructure as a Service deployments companies don’t need to spend capital on new servers, storage arrays and storage capacity. New pieces of hardware would cost thousands of dollars whereas IaaS can cost only a few hundred dollars per month, Tsai says, letting firms shift costs to a month-to-month model.

Upgrading Legacy IT

Upgrading legacy technologies is a key concern for IT pros. According to the survey, 70 percent of respondents cited technology end-of-life (EOL) as the top purchase driver of IT. Additional needs due to company growth (63 percent) and technology upgrade and refresh cycles (59 percent) were next on the list. However, Spiceworks notes, technology upgrades can sometimes be delayed due to budget and time constraints.

Tsai says that SMBs always need “to do more with less,” and generally have smaller IT budgets and staff. Tsai says he expects IT budgets for SMBs to be flat in 2017.

For SMBs, end-of-life is an issue but the firms often do not have the resources or staffing to “facilitate a lot of these end-of-life migrations to something newer.”

Indeed, Spiceworks’ network data shows that Microsoft’s Office 2007 is still installed in 51 percent of businesses across the globe in the Spiceworks network. While Windows Vista is only running in 10 percent of businesses, Windows XP is still running in 56 percent, despite reaching its EOL in 2014. Spiceworks data also shows Windows Server 2003 is running in 52 percent of businesses despite its EOL in 2015.

In 2017, Microsoft Office 2007, Windows Vista and Microsoft Exchange 2007 are also hitting end-of-life, which could spur SMBs to move to the cloud. Tsai says that anecdotally, many in the Spiceworks network have spoken favorably of Office 365, since it is a month-to-month ongoing expense and lets companies get the latest software updated via the cloud for a fixed price. Moving to the cloud also lets companies scale as needed or cancel licenses if employees leave. “It gives them a lot more flexibility,” Tsai says.

In terms of IT hardware, Tsai says many SMBs will only replace hardware when they have to. For employees who only use a few pieces of software on general-purpose notebooks and desktop PCs though, SMBs can and do often decide to stick with devices that may be five or six years old, he says.

However, he also says that some firms may decide to update hardware if certain users — engineers, developers or data scientists — require a great deal of computing power. Employees with older devices may not be as productive, Tsai says. “Them waiting around twiddling their thumbs while they are waiting for a process to complete costs the company a lot of money,” he says.

According to the survey, 60 percent of all IT buyers expect their company’s revenue to jump ahead in 2017. “Small businesses that are growing will also invest in IT on as as-needed basis,” Tsai says. Every company will need to decide if and how they want to boost IT investments, he says, “but I think they are just going to scale in a cost-efficient manner in any way they can.”

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