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The Cloud Shift: The Rapid Adoption of Cloud Services and Next Steps for Business Organizations

By Anupam Govil, President and Partner, Avasant LLC

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Anupam Govil, President and Partner, Avasant LLC

The increased uptake of cloud services is reflected in global IT spending trends that have been steadily shifting from traditional IT offerings to cloud, otherwise known as “cloud shift”.

Rapid improvement in cloud platforms, security, network reliability and cloud based applications has led to the adoption of cloud in ways that were hitherto unprecedented. The industry has shifted from considering “whether” to transition to cloud to the mechanics of ‘when’ and ‘how.’

Service Providers Are Prepared

As enterprise businesses seek options for agility and better return on investment with minimal capital expenditure, the cloud service provider community has responded with offerings beyond the already established benefits of increased flexibility, scalability, cost optimization and utility-driven business models. Cloud providers such as Amazon, Google, Microsoft and others today offer plug-and-play services across the various IT towers such as computing, storage, database, and network. Questions around data privacy, data security and regulatory compliance are valid but do not limit the transformative capabilities of cloud anymore. The service provider ecosystem has matured quickly and is compliant with most market requirements. They have also addressed the evolving needs of the market such as mobile, social media and analytics. Interestingly, the security and redundancy features accompanying cloud services are typically more robust than in-house data centers and co-location options.

Adoption Has Been Rapid

The increased uptake of cloud services is reflected in the global IT spending that has been steadily shifting from traditional IT offerings to cloud. The aggregate amount of Cloud Shift in 2016 is estimated to be $111 billion and likely to increase to $216 billion by 2020, as shown in the figure below.

“The security and redundancy features accompanying cloud services are typically more robust than in-house data centers and co-location options.”

Cloud shift rates are determined by comparing new IT spending on cloud services with traditional non-cloud options in the same market categories.

Cloud data center workloads have been growing steadily over the last few years and are projected to grow with a CAGR of ~33 percent. On the other hand, traditional workloads are witnessing muted growth of ~5 percent CAGR. The graph below shows the trends in this area.

Within the overall cloud workloads, the public cloud workloads are estimated to grow at 44 percent and private cloud workloads will grow at a slower pace of 16 percent CAGR from 2014 to 2019.

Next Steps

Since cloud brings multi-faceted benefits, it is up to organizations to benchmark themselves against a cloud setup and draw a roadmap for adoption.  Organizations can start with an internal assessment to determine their readiness to adopt the various cloud options available in the market. From a business case perspective, organizations need to assess the investment required and ROI compared to their current business and opportunity costs. There are ways to minimize the upfront cost to transition to the cloud, but it requires careful financial modeling and a transformation driven relationship with the provider. If done right, linking the organization’s business objectives to its cloud-enabled IT strategy can help establish cloud as a compelling business driver and competitive differentiator.

Conclusion

Cloud has long graduated from being a disruptive technology – today it is considered table steaks. The adoption levels are substantial and growing in significance to core IT. Cloud Shift is real and is fundamentally reshaping how we source, manage and leverage IT. Organizations have to shape their business and technology roadmap based on this new IT topology.