Cloud

IT will spend more than one-third of its budget on cloud in 2017, says new report

Enterprise IT budgets for hosting and cloud services will rise 6% in 2017, demonstrating an increasing reliance on third party vendors for infrastructure, according to a survey from 451 Research.

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The cloud is continuing its spread into the enterprise: In 2017, 34% of IT budgets will go toward hosting and cloud services, according to a new report from 451 Research. In 2016, enterprise IT spent 28% of budgets on these services.

The 6% increase demonstrates an increasing reliance on third party sources for infrastructure, application management, and security services, the report stated.

The quarterly report, Voice of the Enterprise: Hosting and Cloud Managed Services, surveyed 580 IT professionals worldwide, combined with information and interviews from a panel of 45,000 senior IT buyers and enterprise technology executives.

While it may seem as though cloud providers primarily offer infrastructure services, the report found that only 31% of IT budget spending on cloud goes toward infrastructure. Meanwhile, nearly 70% of spending is used on the following services:

  • Application services (42%)
  • Managed services (14%)
  • Security services (9%)
  • Professional services for cloud enablement (5%)

SEE: Cloud lessons: Five tips for firms moving to AWS

Further, a large amount of hosting and cloud services budget spending goes to unmanaged or self-managed infrastructure or application services, the report stated. "Nearly half—44% of infrastructure services spending and 49% of application services spending—is for products that are bundled with additional managed or security services," according to a press release.

The markets for unmanaged IaaS and SaaS are dominated by large, hyper-scale vendors—but spending trends indicate that enterprises are interested in the kind of bundled services that a broader market of managed service providers can deliver, Liam Eagle, research manager at 451 Research and lead author of the report, said in the press release. "A strong opportunity exists for service providers offering a diversified set of hosting and cloud services that includes infrastructure and application hosting, as well as managed services and security services delivered around them," Eagle said in the press release.

Enterprises are using hosting and cloud services from a variety of providers, the survey found. The most common were public cloud infrastructure providers, used by 69% of businesses, and managed hosting providers, used by 26% of businesses.

"The market for managed infrastructure and application services is a longer tail market, with greater opportunities for providers who emphasize expertise in operating, optimizing and securing the infrastructure and application products they deliver," Eagle said in the press release. "This includes opportunities to deliver services based on reselling infrastructure and application services from the largest IaaS and SaaS vendors."

To go along with the forecast of increased spending, cloud data center traffic is also expected to rise 262% by 2020, according to a recent Cisco study, reported by TechRepublic senior writer Teena Maddox. The expected rise is due to increased migration to cloud architectures, and the ability to scale quickly and support more workloads than traditional data, Maddox reported.

The 3 big takeaways for TechRepublic readers

  1. In 2017, 34% of IT budgets will go toward hosting and cloud services, up from 28% in 2016, according to a new report from 451 Research.
  2. A large amount of hosting and cloud services budget spending goes to unmanaged or self-managed infrastructure or application services.
  3. Cloud data center traffic is expected to jump 262% by 2020, according to another report.

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About Alison DeNisco

Alison DeNisco is a Staff Writer for TechRepublic. She covers CXO and the convergence of tech and the workplace.

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