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Public cloud computing spend to overtake traditional IT

By Catherine Knowles
Fri 11 Feb 2022

Enterprise IT spending on public cloud computing, within addressable market segments, will overtake spending on traditional IT in 2025, according to Gartner analysts.

Gartner’s ‘cloud shift’ research includes only those enterprise IT categories that can transition to cloud, within the application software, infrastructure software, business process services and system infrastructure markets.

The analysts find that by 2025, 51% of IT spending in these four categories will have shifted from traditional solutions to the public cloud, compared to 41% in 2022.

Almost two-thirds (65.9%) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.

Gartner research vice president Michael Warrilow says, “The shift to the cloud has only accelerated over the past two years due to COVID-19, as organisations responded to a new business and social dynamic."

He says, "Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.”

According to Gartner, in 2022, traditional offerings will constitute 58.7% of the addressable revenue but growth in traditional markets will be much lower than cloud.

Demand for integration capabilities, agile work processes and composable architecture will drive continued shift to the cloud, as long-term digital transformation and modernisation initiatives are brought forward to 2022.

Technology product managers should use the cloud shift as measure of market opportunity. In 2022, more than $1.3 trillion in enterprise IT spending is at stake from the shift to cloud, growing to almost $1.8 trillion in 2025, according to Gartner.

Ongoing disruption to IT markets by cloud will be amplified by the introduction of new technologies, including distributed cloud. Many will further blur the lines between traditional and cloud offerings, the analysts state.

Enterprise adoption of distributed cloud has the potential to further accelerate cloud shift because it brings public cloud services into domains that have primarily been non-cloud, expanding the addressable market.

Organisations are evaluating it because of its ability to meet location-specific requirements, such as data sovereignty, low-latency and network bandwidth.

To capitalise on the shift to cloud, Gartner recommends technology and services providers target segments where the shift is occurring most aggressively, in addition to seeking new high-growth cloud opportunities.

For example, infrastructure-related segments have a lower level of cloud penetration and are expected to grow faster than segments such as enterprise applications that are already highly penetrated. Providers should also target specific personas, adoption profiles and use cases with go-to-market initiatives.

Gartner’s research on cloud shift provides a high-level view of the market impact of cloud computing by measuring the ratio of enterprise IT spending on public cloud services compared with traditional (non-cloud) for a given set of market segments.

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