What’s Driving IT Spending from Traditional Systems to Cloud?
Reanna Gutierrez  |  September 15, 2016
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IT Spending Shifts to the Cloud

We all know the cloud is continuing to pick up steam. This is highlighted in new research by Gartner that finds the shift to cloud computing will impact more than $1 trillion in compounded IT spending over the next five years, making cloud computing one of the most disruptive forces in IT spending since the first days of the digital age.

The report, “Market Insight: Cloud Shift — The Transition of IT Spending from Traditional Systems to Cloud,” finds that while all IT spending is forecast to grow from $3.5 trillion in 2016 to $3.9 trillion in 2020 (a CAGR of 2%), growth in spending on cloud computing will far outpace that, hitting a CAGR of 17.5% through the same period. The result is a cloud shift totaling $114 billion in IT spending in 2016, growing to $216 billion in 2020.

Gartner says the shift is driven by organizations adopting the cloud to:

  • Replace existing IT systems (hardware, software and/or services): As traditional IT systems reach end of life, more companies are opting to forego capital-intensive replacements and instead purchase alternatives in the cloud, where upfront costs are less, overall costs are distributed across monthly subscriptions and upgrades are faster and easier.
  • Complement or extend existing IT systems: Instead of purchasing extra hardware and software to accommodate peak seasonal loads or handle temporary projects, many companies use the cloud to scale capacity up and down as needs require.
  • Create new applications and/or services: Spinning up new services in the cloud creates significant cost and time-to-market advantages when deploying new applications and services.

The research firm finds this shift to the cloud currently impacts spending on all IT hardware, software and services businesses, although some are affected more than others. Of the five IT spending categories Gartner tracks, the shift to the cloud indirectly affects devices and communications services, but it directly affects the other three:

  • Data center systems, including server hardware, external controller-based storage, enterprise networking equipment and unified communications.
  • Enterprise software, including enterprise application software and infrastructure software.
  • IT services, including business IT services and IT product support.

And this impact won’t lessen any time soon, since 88% of organizations using cloud services or planning to use them in the future say they embrace a cloud-first strategy, where they choose the cloud first over all other options when it comes to IT expenditures.


Shift Brings Both Risk and Opportunity

While cloud adoption varies by country, region, vertical and organization size, companies with deep investments in traditional non-cloud systems will likely see significant cloud shift as they look to augment or replace those systems, while those with lighter technology investments will see a more incremental shift.

The cloud is here to stay. To capitalize on the future, OneNeck IT Solutions has the experience to reduce your reliance on traditional IT while maximizing your value in the cloud, ensuring a cohesive blend of traditional and cloud environments. OneNeck builds best-in-breed cloud solutions and roadmaps to leverage your current investment and create long-term strategic business enablement.