Cloud computing is maturing, creating a host of opportunities for providers as more and more companies consider the technology for their IT needs. In a new report the cloud market is found to be valued at around 16% of the $1.1 trillion enterprise IT market, while continuing to grow at around 17% per year to 2020. Concerns around cost and security among potential customers has fallen, although compliance and regulatory concerns have grown.
Cloud computing is increasingly becoming part of the wider IT market, as the technology develops, needs from customers change and the price comes down. To better understand the evolving cloud computing landscape, a new report from Bain & Company, titled ‘The Changing Faces of the Cloud’, maps out the current situation as well as opportunities for the future.
The cloud market now represents around 16% of the $1.1 trillion enterprise IT market. The largest segments in the cloud arena are SaaS and public cloud infrastructure and enabling services. The market is however, projected to see strong growth to 2020, hitting average CAGR of 17%. SaaS and IaaS/PaaS are projected to see growth rates of 18% and 27% annually respectively. Private cloud infrastructure & enabling services too are projected to see growth at above 20%, coming in at 25% annually on average.
The research also found that of the total ~$375 billion in revenue growth added to the global enterprise IT pie between 2015 and 2020, 60% is projected to go towards cloud computing solutions, whether at the infrastructure level of the sales and management level.The reasons for growth, according to Michael Heric, a Bain Partner, is that “Cloud providers realized that they can’t compete on price alone. In response, they’ve added services that make their platforms more valuable and easier to use, and customers are willing to pay for these features. This shift in thinking has been the main reason for cloud’s tremendous growth over these last few years.”
Cloud technology is starting to mature, and with it, perceptions about its vulnerabilities and drawbacks are changing. Data security was in 2015 cited among the top three concerns of 35% of respondents, down from 42% in 2012. Uncertainties about costs and savings have seen the most significant call, down from 36% to 21% of respondents citing it within their top three. Loss of control concerns too have fall, from 22% in 2012 to 19% in 2015.
A number of areas have seen a rise in concern however, with companies increasingly concerned about regulatory or compliance conditions for cloud computing proposition, up from 21% to 27%, while questions about data portability and ownership are up slightly, from 18% to 20%. The biggest rise in concern, however, comes from lock-in conditions, up from 7% in 2012 to 22% in 2015.
The study further found that the cloud market remains relatively undeveloped. The largest part (90%) of current demand in the segment, according to the firm, stems from replacing or upgrading existing, non-mission critical applications and from the creation of new digital businesses. Its wider uptake into new business models, IT transformations and ways of working has, largely, not yet begun in the industry.
To better understand the future potential of the market, the firm considers five key groups, which were identified by the firm in a 2011 study. A follow up study considered how the groups had transformed their IT usage in relation to the cloud. The ‘early adopters’ or ‘transformational’ group represents around 11% of total respondents. This group was already heavily involved back in 2010, with 44% of its IT operation in the cloud, this has since grown to 69%, with a total value of around $24 billion.
The heterogeneous group (12% of companies surveyed), whose IT priorities evolve over time and whose IT demands are highly technical, has seen its cloud as a % of total IT increase from 13% in 2010 to 36% in 2015, with a total value of around $13 billion to the market. The ‘opportunistic adopters’ (21%), have diversified IT needs, and operate with sensitive data, this group has seen cloud adoption hit around 37% of IT, with a total spend of around $24 billion.
The largest group however, the ‘slow-and-steady’ segment, has 43% of companies. This group has remained in ‘wait and see’ mode regarding the technology, while also focused on minimising disruption while operating within clear regulatory constraints. The group has increased its share of IT in the cloud slightly, up from 1% in 2010 to 16% in 2015.
The consultancy firm also sought to identify how the different groups are likely to respond to the increasing maturity of the cloud computing market. One key shift is in the slow-and-steady group, whose appetite for the segment, the firm projects, is likely to hit around 30% of total cloud spending by 28%, as cloud as a % of total IT spending in the group also hits 30%. The transformational group will see its share of total cloud spending decrease as a % but stay relatively close in absolute terms to the 2015 result, while the transformational group will see its share of total IT spending decrease as the segment reaches saturation.
“Late adopters have made a major jump in cloud use over the last 12 months. They’re entering the cloud market in record numbers and, in a somewhat unexpected move, are using providers few anticipated,” says Michael Heric, a Bain Partner in the firm’s global Technology Practice. “This has created a shake-up among technology providers.”