Enterprise Cloud Adoption: market hype or reality?

Over the last 7 years, cloud adoption has been on the list of top 10 IT priorities… every single year. In 2015, it is yet again number 3 in a recent Gartner survey.

Given the media coverage cloud is getting, you would be forgiven for thinking that cloud services have become mainstream in the enterprise, and perhaps your organization is behind the curve. Stop and have a guess at the overall market share of cloud services relative to Global IT spend, and while you are there consider your own organizations spend on cloud.

Let’s have a look at the numbers. Louis Columbus has consolidated recent market data in this Forbes blog and his 2014 research post. For example Gartner estimated Cloud revenues at $130B, Forrester at about $80B, and Goldman Sachs estimated IaaS and PaaS at $21B combined. IDC, for their part, estimated that Public Cloud would represent $47.5B in 2013.

On first pass, the figures appear contradictory – however, and once properly defined so as to be comparable (IaaS, PaaS, SaaS, Cloud advertising, …), they do add-up. When discarding cloud advertising from the Gartner figures, the Forrester, Gartner and IDC estimations come a lot closer: between $12B to $15B for IaaS and PaaS in 2014, while SaaS is estimated between $40B and $60B. The numbers are not as big as the market hype would lead you to think. Depending on how you slice IT spend, cloud still only represents between 1% and 5% of the global IT spend of $3,737B in 2014.

Now let’s compare cloud adoption rates and use cases among different types of organisations. Rackspace and PC World put adoption at close to 90% of businesses in 2014. However, while 68% of companies with fewer than 20 employees are using cloud services, adoption in companies with 500 or more employees is at only 53%. The nature of the application workload, and delivery model choice of private cloud v’s public cloud also differ greatly across organisations. Because large enterprises have greater resistance to change and more complex regulatory constraints, they tend to focus on tactical workloads such as test & dev, where the degree of risk is perceived to be low. In addition very few of the large European enterprises (with some exceptions) fcnpartners work with have started to adopt public cloud services.

The bottom line is that although cloud still represents a small part of Enterprise IT spend, investment and adoption rates are growing fast. Goldman Sachs Research estimate a 30% CAGR, and believes that we’re only in year 6 of a 20 plus year cycle.

As with most disruptive innovation, it takes time for both technology and organizational acceptance to mature enough for the vision to become reality. We believe that despite the hype, the technology available is really approaching ‘Enterprise class’, and that large organisations are willing accept the changes needed to enable massive adoption of cloud computing in the years to come.

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