All public cloud spending estimates significantly undervalue the market, because all miss just how much developers are spending without telling anyone.
Cloud computing is big. It's so big that major analysts are scrambling to outdo each other in sizing the public cloud computing market. IDC, for example, says public cloud spending reached $47.4 billion in 2013, and it will jump to $107 million by 2017. Forrester, not to be outdone, believes the public cloud market hit $58 billion in 2013, and it will top $191 billion by 2020. Gartner, going for gold, thinks the public cloud services market is already worth $132 billion, and it will explode to $244 billion by 2017.
Sadly, each of them is likely wrong. Really, really wrong.
While it's always tricky predicting the future, it's even harder to do so when relying on corporate estimates of cloud spending. It became clear from an Environmental Protection Agency report in July that organizations haven't a clue as to how much they're actually spending on public cloud services.
Of course, this means that public cloud computing is likely much bigger than we thought. Right now. Today.
Convenience sells cloud
Given how inflated analyst expectations are for public cloud spending, it's saying something that they may still be undervaluing cloud spending. Gartner, after all, puts up some big numbers (Figure A):
Public cloud services market and cloud spending.
It's just that they're not big enough.
As David Linthicum rightly calls out, "Most IT leaders don't have a real understanding of how many cloud computing (or other technology) resources are being used — and to what extent — right under their noses." I saw this happen for years with open source, and now with cloud computing. The reason is the same in both cases:
Cloud computing makes it much easier to get work done, just as open source did before it. Small wonder, then, that organizations call out speed/agility as the top reason for embracing the cloud (Figure B):
Reasons why organizations embrace the cloud.
Harried developers under tight timeframes simply can't afford to run the bureaucracy gauntlet. They therefore download software (open source) or pull out their credit card (cloud).
The elephant in the cloud
Lest you think this is the exception, not the rule, take a look at the EPA's report. While the title reads "EPA Is Not Fully Aware of the Extent of Its Use of Cloud Computing Technologies," the real truth comes later: "The EPA did not know when its offices were using cloud computing."
Not "we didn't know how much our offices were using the cloud." No, the EPA is basically saying, "We don't have a clue when it comes to cloud usage."
This becomes clear when the EPA reveals its methodology for uncovering cloud adoption:
"The auditor lacks confidence there were 11 cloud IT services as identified in the completed cloud survey. Specifically, the Office of Acquisition Management (OAM) indicated that the Cloud Survey was completed by performing a search for the word 'cloud' in the procurement description. As a result, the auditor concludes that regardless of whether a contract was a cloud contract, the contract would only be included on the list if the term 'cloud' appeared in the description of the procurement."
Almost by definition, this methodology would miss much of the agency's cloud adoption, which would have skirted the formal procurement process.
The EPA isn't alone, of course. As I've noted before, Cloudability, which gives companies visibility into how much money they're spending for cloud services like AWS, passed the $1 billion mark back in June (2014). To put that in perspective, in 2011, Cloudability had just $1 million in cloud spending under management.
For a startup to see that kind of growth indicates that there's a lot of spending right now on the cloud, a significant percentage of which probably isn't finding its way into analyst reports... or the CIO's analysis.
Please meet your new kingmaker
For those who pay attention to developer trends, this isn't a surprise at all. Developers increasingly define how and which software is adopted within large and small organizations.
And developers want convenience.
As Redmonk analyst Stephen O'Grady writes in his book, The New Kingmakers:
"In almost every case, a physical server will outperform the virtual equivalent offered up by public clouds. And yet the adoption of public cloud has been sufficient to force Dell to go private, IBM to decommit from the x86 server market entirely and HP to try and charge for firmware upgrades. This is the power of convenience. Much like the camera you have with you being better than the high end SLR too heavy to carry around, developers - the new kingmakers within the enterprise - are heavily advantaging time to productivity when it comes to technology selection."
Small wonder that less and less of enterprise IT budgets is spent on hardware and software, and more and more is spent on developers. Developers are the great innovators: they turn ordinary hardware and software into data-driven applications that can dramatically improve a company's business.
Or, as is more likely the case, they turn cloud services into innovation for your company. And sometimes, if you're lucky, they'll tell you how much they're spending on the cloud.