​Cloud services spending set to rise as IT budgets realign

By By James Henderson Nov 21st 2016
​Cloud services spending set to rise as IT budgets realign
Businesses will increasingly look outside for application and security services

Enterprises currently spend 28 percent of total enterprise IT budgets on hosting and cloud services, with the number expected to climb to 34 percent in 2017.

Findings from 451 Research indicate a growing reliance on external sources of infrastructure, application, management and security services.

Although hosting and cloud providers frequently position themselves as primarily providers of infrastructure, research shows that only 31 percent of spending goes towards infrastructure services, while nearly 70 percent of enterprise budgets for hosting and cloud is being spent on other services.

Specifically, they include application services (42 per cent); managed services (14 percent); security services (9 percent) and professional services for cloud enablement (5 percent).

The research reveals that a significant portion of hosting and cloud services spending is on unmanaged or self-managed infrastructure or application services.

Nearly half (44 percent) of infrastructure services spending and 49 percent of application services spending is for products that are bundled with additional managed or security services.

“The markets for unmanaged IaaS and SaaS are dominated by large, hyper-scale vendors,” 451 Research analyst Liam Eagle added.

“However, this spending trend indicates there is an appetite for the type of bundled services a broader market of managed service providers are well positioned to deliver.

“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.”

In addition, the survey indicates that enterprises use hosting and cloud services supplied by a broad range of provider types.

Public cloud infrastructure providers, which are used by 69 percent of businesses, are the most common, followed by managed hosting providers, used by 26 percent of enterprises.

According to Eagle, IaaS and SaaS usage is strong and these markets are dominated by small numbers of established leaders.

“The market for managed infrastructure and application services is a longer tail market, with greater opportunities for providers who emphasise expertise in operating, optimising and securing the infrastructure and application products they deliver,” he said.

“This includes opportunities to deliver services based on reselling infrastructure and application services from the largest IaaS and SaaS vendors.”

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