Cloud Adoption Sparks Services Spending Shift

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Gartner's latest research suggests that, while cloud services are converging and combining, they're always expanding. With organizations shifting budgetary requirements to more external IT services, solution providers should be gearing up to meet the demand.

With 2013 looming, there's continued buzz about the state of the cloud, especially since 2012 proved so instrumental in the evolution of cloud and mobility services. But this dynamic landscape is far from settling down. In fact, according to Gartner, public cloud services in the upcoming year will "simultaneously [be] cannibalizing and stimulating demand for external IT services spending."

Gartner surveyed 556 organizations across nine countries from June to July 2012. Findings show 19 percent are using cloud for most of their production-level computing requirements, and 20 percent are almost exclusively using cloud storage services to meet almost all storage requirements. Of them, 71 percent of cloud adopters will "increase external spending on end-user computing infrastructure management," while another 70 percent will increase spending on external application development.

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These facts and figures have given way to bigger trends, particularly on what kinds of services spending is allocated to the following:

  • Infrastructure-as-a-Service: Adoption is expanding rapidly, with many organizations using IaaS beyond beta tests or prototype production loads. A recent VMware Inc. survey confirms this. In fact, IaaS is expanding so rapidly, it seems to be directly related to the decrease in on-prem spending. Gartner also notes solution providers focusing on emerging externalities will need a mix-and-match approach, since the usage of hybrid-style deployments has not waned in popularity.
  • Platform-as-a-Service: PaaS is on the rise, too. Gartner attributes the increasing demand as a "leading indicator" of how cloud environments are evolving into a competitive battleground for "substantive" services. Space for MSPs and other solution providers to provide migratory and consultative practices is as plentiful as the spending on PaaS.
  • Software-as-a-Service: In the software market, Gartner notes the adoption of large enterprise application suites (SAP, Salesforce.com, etc.) shrink the market for application outsourcing. Solution providers that can deliver end-to-end applications don't need to pick from disparate application providers. But, here's an interesting twist: When it came to data center services, "various delivery models and options" were considered by organizations, which means not all "one-stop shop" offerings provide an automatic advantage in the marketplace. Gartner attests SaaS adoption will continue to push the boundaries of where organizations utilize external cloud services, which will both reshape the development of cloud and continue to shift the role of the service providers.

For some color, Bryan Britz, research director at Gartner, said public cloud services have become commonplace "in markets that were previously not the target market for most IT services providers." Service providers are likely to be called on from the SMB to the enterprise. However, Britz also says within the largest of clients (with the largest of budgets) are where solution providers will find "the cannibalization of traditional IT services by public cloud services" most prominent.

Gartner predicts organizations will continue to allocate budgetary resources to external and public cloud technology, which in some ways will create a snowball effect across the industry, bringing many first-time buyers to the market.

If spending is increasing, are budgets increasing, too? Gartner finds budget cuts are not planned for most organizations, especially in places where spending has already been allocated for external IT solutions. These budget plans are now part of multi-year cloud strategies. Unsurprisingly, in places where spending as been reduced, it's been reallocated from the data center. Only 14 percent plan on slashing their external spending.

In a sense, this still paints a landscape where solution provides must deliver hybrid solutions, although Gartner warns providers that adhere too closely to legacy solution support are not long for this world.

The bottom line is short and sweet: Opportunity is rising and the budget is there -- partners need only to reach out and grab it.

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