Nov 07 2016

Cloud Infrastructure Spending Is Increasing, but Is Cloud Adoption Jumping as Well?

Recent surveys show conflicting signals about how SMBs and enterprises are using the cloud.

Spending on cloud IT infrastructure is expected to rise in 2016, yet market research is giving mixed messages about whether that increased spending is leading to higher adoption rates of cloud applications by businesses.

Some of this confusion may stem from a muddying of the waters over what exactly counts as a “cloud” app and how businesses and cloud service providers define the term.

What is clear is that investment in cloud infrastructure is increasing and businesses have refined their thinking about cloud services.

Investments in Cloud Infrastructure Set to Increase

Investment in the network, storage and server infrastructure to support cloud deployments is set to jump this year, according to research firm IDC. Last month, IDC reported that total spending on IT infrastructure products (server, enterprise storage and Ethernet switches) for deployment in cloud environments will increase by 16.2 percent in 2016, to $37.4 billion.

According to IDC, spending in public cloud data centers will grow by 18.6 percent in 2016 and account for the majority (62.5 percent) of this spending.

Overall, spending on IT infrastructure deployed in off-premises cloud environments (public and private) will reach $28.4 billion in 2016, according to IDC. In contrast, IDC expects spending on enterprise IT infrastructure deployed in traditional, noncloud, environments to dip 1.8 percent in 2016, but it will still account for the largest share (63.1 percent) of end-user spending.

IDC estimates that investment in IT infrastructure for off-premises cloud deployments will rise by double-digit percentages across all regions, indicating strong movement toward off-premises IT resources. Similarly, in on-premises settings, IDC thinks spending on IT infrastructure for private clouds will increase in all regions.

Is Cloud Adoption Rising?

Despite this growth in spending on IT infrastructure for the cloud, it’s unclear if cloud adoption is growing in tandem. An online survey of 500 business and IT executives conducted earlier this fall by industry trade group CompTIA found a broad decline over the past two years in the reported use of cloud-based apps, the Wall Street Journal reports, noting a decline in the use of business productivity, email and analytics tools; and collaboration, customer relationship management, enterprise resource planning and expense management apps.

CompTIA’s survey found that the number of companies running cloud productivity tools this year fell to 45 percent, down from 63 percent in 2014. The survey found a similar decline in the use of cloud-based email, down to 51 percent (from 59 percent), while use of analytics apps dropped to 35 percent (from 53 percent) and collaboration tools slipped to 39 percent (from 52 percent). The declines appear to run counter to cloud market forecasts.

If the cloud market is growing, what explains these numbers? “Users are showing a tendency toward refinement of cloud concepts,” CompTIA noted in a research report, according to the Journal. “In the early days of the cloud, employees likely assumed that any off-premises application was cloud-based.”

Basically, business and IT leaders are now “demonstrating an appreciation for the characteristics of true cloud systems.” Companies are realizing that managed hosting services are not the same as having access to shared software or computing resources that can scale up or down.

R “Ray” Wang, principal analyst and founder of Constellation Research, told the Journal that in the past, cloud adoption rates usually reflected the use of apps that were labeled as “cloud” apps but that were actually hosted solutions or other noncloud tools. “We’re not seeing lower cloud adoption,” Wang said.

Meanwhile, according to a survey released earlier this month by IDG Enterprise, cloud adoption is indeed rising. The survey of 925 IT decision-makers found that while 70 percent of organizations have at least one application in the cloud, more than half (56 percent) are still identifying IT operations for cloud hosting. In 2011, the IDG Enterprise survey found that 51 percent of organizations had at least one app in the cloud, so adoption has been steadily increasing.

The survey found that organizations are using multiple cloud models to meet their business’s needs, including private (62 percent), public (60 percent) and hybrid clouds (26 percent).

IDG Enterprise expects the percentage of the total IT environment that will be in the cloud to grow in the next 18 months. Currently, 23 percent of the average organization’s IT environment is in private cloud, and that is expected to increase to 28 percent. Similar growth is expected for public cloud (15 percent, growing to 22 percent) and hybrid cloud (7 percent, to 10 percent).


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