The Market Is Moving to the Cloud
The cloud is arguably one of the most significant trends to hit the IT industry. It is more disruptive than the change to client/server or the Internet. It provides end customers with lower costs, reduced
complexity, and greater agility. While early adopters were attracted to the economic benefits of the cloud, more and more customers are excited about the business innovation that cloud can offer.
The growing dominance of the cloud is evidenced by the following IDC insights and predictions:
- IDC is seeing end customers shift from buying servers to buying services. IDC predicts that service providers will account for a whopping 43% of total server shipments by 2017. In turn,
customers will buy online services from these service providers instead of owning and running their own servers.
- IDC has defined a server submarket called "hyperscale" made up of approximately 25 companies with massive server farms (think Microsoft, Google, Amazon, and Facebook but also large banks, pharmaceutical companies, etc.) that together are buying about a quarter of
all server units today. This number will grow to almost 39% by 2018.
- IDC predicts that over 90% of net-new commercial apps will be developed specifically for the cloud in 2014 and beyond.
- By 2018, 27% of all software revenue will be subscription based. When you include maintenance revenue, 60% of software revenue will be recurring by 2018.
- As of 2014, over 50% of buyer firms have adopted some form of cloud.
- IDC predicts that 70% of CIOs will embrace a "cloud first" strategy in 2016. This doesn't necessarily mean "cloud in the end." Companies will look first to public cloud options to solve a problem before looking at hosted or even on-premise options.
- Total public IT cloud services (SaaS, PaaS, and IaaS) spending will reach over $127 billion in 2018. The total IT market will grow at a CAGR of only 4.1% from 2013 to 2018, while public cloud will grow at a CAGR of 22.8%. This means public cloud spending growth is over five-and-a-half times total IT market spending growth.
- Cloud-based software applications will grow much faster than their noncloud brethren. As shown in Figure 1, cloud applications revenue will grow at a CAGR of 19.2% from 2013 to 2020, while noncloud applications revenue will grow at only 2.7%. This is a factor of over
seven times growth of cloud over noncloud applications. Cloud applications are forecast to represent 32.1% of the market share by 2020.
