Cloud conundrum

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24 February 2017 | 0

Paul HearnsSome interesting figures from counting house IDC emerged this week, regarding the extent of cloud spending.

Previously, the analyst had put a figure on world-wide technology spend for 2017 as $2.4 trillion (€2.25 trillion), with some 80% of this attributable to business.

Of that proportion, 45% would be from businesses of 1,000 employees or more. That is a good big pie from which to take a slice. However, an interesting slice emerged from further figures released by IDC.

“With the level of cloud discussion going on in the world, one might have been forgiven for thinking that cloud computing accounted for far more of technology spend than a mere 5%, but there you go”

As widely reported, in its new “Worldwide Semiannual Public Cloud Services Spending Guide” it presents that “worldwide spending on public cloud services and infrastructure” for 2017 will be $122.5 billion, or €115.7 billion.

Now, taking the previous figure, the cloud spend comes out about 5%.

With the level of cloud discussion going on in the world, one might have been forgiven for thinking that cloud computing accounted for far more of technology spend than a mere 5%, but there you go.

However, it is worth looking at this a little bit more closely as there are more things at work than mere pie-slicing.

Firstly, the rate of growth of the cloud computing side of things is worth looking at.

We all know that many companies are going through a period of digital transformation at the moment, trying to bring the benefits of digital technology to all aspects of the business. Cloud computing and as-a-service delivery are key elements of this agenda. Consequently, the big vendors and service providers have been scrambling to transform to allow them to serve this growing need.

We reported some time ago that the big four, as reported by the Synergy Research Group, are by far, outstripping the rest of the market in their share. The research group included infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and hosted private cloud services in its figures, and found that Amazon Web Services, Microsoft, IBM, and Google collectively control more than half of the worldwide cloud infrastructure service market, with an overwhelming lead held by AWS, followed by Microsoft, IBM and Google.

Again, however, this is not the full story.

As vendors take the pain in traditional areas such as traditional servers and network infrastructure, the proportion of revenues form cloud computing is growing very strongly, often outperforming other areas in multiples. Take HPE’s most recent results as a case in point.

While HPE for the first quarter of 2017 appears to be bad news, there are some critical highlights that indicative of future performance. While overall revenues were down some 10% from the previous year, with server revenue down 12%, storage down 13” and networks down 33%, SaaS revenues were up 4% and growing strongly. Similarly, its high-performance computing division is doing rather well, as commented upon in a previous edition of this very column.

This is a familiar story with Microsoft, IBM and Oracle, where their respective earnings from cloud activities are still relatively small compared to other areas, but their growth rates are often multiples of other areas and that is likely to go only one way in the coming years.

Coming back to the IDC cloud spend figure, it does appear to be disappointingly low for the length of time we have been listening to cloud-hype, cloud-first, cloud-strategies and cloud-washing, but peeling back the layers reveals a trend that is strong and likely to continue for some time yet.

What is worthy of note are those tech vendors for whom cloud revenues are still low and not showing double digit growth — it is those companies that must ask themselves where will they be when cloud spend worldwide hits the 20%, or even 50%, mark. Will they still exist, or still be relevant?

 

 

 

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