In-house IT hardware spending has been on hold thanks to executives flip-flopping on whether to move to cloud computing. It has not been because they have actually shifted to cloud services.
The problem has been merely inertia caused in companies by “decision-making around the cloud,” says Morgan Stanley in a new financial research note. The financial services firm suggests that once enterprises complete their cloud assessments, their cheque-books will open once more.
In fact, Morgan Stanley, which advises people on industry investments, says investors could see double-digit earnings growth from the IT hardware sector in 2018. And it has upgraded its fiscal view from “cautious” to “attractive.”
“Several catalysts are converging to give IT hardware a new lease on life,” writes Katy L. Huberty, head of North American Technology Hardware Equity Research, on Morgan Stanley’s web site.
In-house computing is not being dumped, she says. It is just been on hold while managers figure out how much computing to move to the cloud and how much should remain on-site.
Huberty says the past three years have been problematic for IT hardware firms because of this dithering.
Why IT hardware spending will increase
While undoubtedly enterprises are moving software applications from “on-premises data centres to the cloud,” that’s not the whole story, Huberty says. Currently, 21% of computing is accomplished in the cloud. That number will indeed rise, as we expect, and should be 44% by 2021. However, because enterprise cloud plans are beginning to solidify, or become less vague, firms are now ready to upgrade the IT gear they are retaining or think they’ll need.
“They aren’t abandoning on-premises computing. Instead, many are adopting a hybrid IT model in which applications move between a public cloud and their own internal data centres,” she explains.
Other factors coming into play and contributing to the optimism, according to Morgan Stanley, include more cash being available because of tax law changes in the US and advantages to depreciating equipment costs in the first year due to economic growth. A weak dollar and lower memory costs are also helping the shift.
Interestingly, the firm also writes of a shift overall away from consumer-oriented tech cycles to “an era of industrial innovation.” It is talking about artificial intelligence, the Internet of Things (IoT), and so on.
And indeed, global smart phone shipments were lower in 2017 for the first time, according to IDC. Although the market researcher says that decline will be short-lived.
Edge play
One could also mention edge computing in the context of pro-in-house technology investments, and a further reason to be bullish on in-house computing. It has been said before that future requirements for minimal-latency, instant access to number crunching data may become more important, as robots and the IoT take hold — robotic surgery, for example, will probably need to be latency-free. One way that latency can be reduced is by shortening geographic distance in the data pipe.
One fly in the ointment, however, is the increasing complexity of managing in-house data centres. With cloud, enterprise managers can hand over what could become increasingly intricate processes to specialists. For example, some businesses do not think they have the right skills for IoT. As a result, they are increasing their use of collaborators, IoT service provider Vodafone claims.
IDG News Service
Ltd
