Cannibal cloud: How spending on the cloud is eating into IT budgets

Cannibal cloud: How spending on the cloud is eating into IT budgets

Summary: Spending on public cloud is replacing some types of IT services spending but also stimulating others, according to research.


One of the biggest questions of the moment for the IT industry is what the shift to the cloud will mean for how IT budgets are spent.

The early indications are that when it comes to spending on IT services, while some areas will see budgets dwindle, cloud will lead to an increased expenditure on new types of IT services, research from analyst house Gartner has found.

According to Bryan Britz, research director at Gartner, the reality of how the cloud is affecting IT spending is complex, and while spending on cloud is cannibalising some revenues it is also creating new requirements for IT services.

For example, while an organisation may move some workloads to the public cloud – thereby spending less on datacentre outsourcing — this can often lead to a bigger rethink of their hosting strategies, which will often mean more IT services spending: "In a lot of cases it actually kicks off new growth," Britz told ZDNet.

Increase in demand

Elsewhere, cloud will have both positive and negative effects on application outsourcing. While software as a service (SaaS) adoption will cut into the potential market for application outsourcing, SaaS take-up will also lead to an increase in demand for consulting and implementation services, Gartner said.

"SaaS is still an implementation project for companies: they still, in most cases configure it – which is the new word for customise. What we've seen in SaaS implementations is there is still a fair amount – admittedly less than if they were doing a big package implementation – but still a fair amount of professional services associated with adopting a SaaS platform," Britz added.

Gartner said the move to SaaS will also help drive additional revenue to the application outsourcing market as a consequence of organisations considering cloud options for applications that would previously have been developed in-house.

The impact of cloud on IT budgets will also vary by company size — large enterprises are likely to replace some of their spending on traditional IT services with public cloud spending. However, as public cloud services are also being adopted by small and midsize businesses — previously not the target market for most IT services companies – there are new spending opportunities developing in the SME sector.

But just because moving to the cloud can lead to more spending on IT services – not less – that doesn't undermine the benefits of moving to the cloud, said Britz.

"The argument should really be about agility more than it is about cost. It's more about speed and agility and frankly that needs to be the tipping-point discussion," he said.

Topics: Cloud, Enterprise Software, Outsourcing, Tech Industry

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  • Cloud spending

    Regardless of spending, expertise is moving to the cloud and companies do best when they can focus on their core business. Running data centers and configuring web sites will be outsourced to cloud vendors, the only question is when.
  • And the lack of security...

    Data in the cloud is not yours.
    • Truth...

      But truer still.... No one cares more about your data than you do.
      • Is in the eye of the buyer

        My data isn't worth much to anyone but me...but Ford, GE or Boeing's data is worth a whole lot to certain parties, I'm sure...

        Even an internal company cloud structure would pose an incredible risk to IP.

        Any company with thousands of internal accessing laptops floating in the wild is already an IT manager's nightmare to keep secure - if all their data is available via the cloud to any of those individual laptops...urrrgh.
    • your own private cloud

      Why not built your own secure private cloud with turnkey software such as ThinServer
  • When you quote someone, please provide a reference

    When you quote Gartner, could you please provide a reference to that article?
  • My company is busy insourcing.

    More and more services are being insourced into our datacenter because we've proven time and time again we can better support our own systems than some so called cloud provider. Sure Intuit hosts some forward facing apps for us but our core infrastructure is our own. Virtulization has reduced the cost of running our Datacenter drastically and has made us more flexible. The only cloud we really depend on turns out to be our own.
    • Team

      Sounds like you have a pretty solid team. I don't think any "cloud" service could really offer anything better than that.
  • The other way of seeing it

    1)Cost effective doesn't mean cost saving.
    Free up IT resources. While IT team can take up more crucial role example growing or further enhance sales force IT task. Or ultimately, in future will have a role of aiding influential revenue generating score card to keep it in check.
    2)Agility gain
    Gaining agility to change is top priority for current climate. Hosted platform enable customer to change & shorten implementation + deployment stages. And further eliminate hardware dependent solutions (into certain extend).

    However, most cloud solution are still on infant stage now with limited customisation. Which is why cloud should be more "desirable" among SME due to the simplicity.
    Large corporate will need more complex customisation which could cost more, as they need look into multiple business priorities, securities, etc solution integration.
    Walter Kong