Most key enterprise IT spending will shift to cloud by mid decade says Gartner

More than half of enterprise IT spending in key market segments will shift to the cloud by 2025, overtaking spending on traditional IT, according to industry analysts Gartner.

This compares to 41 percent in 2022.
 
According to Sydney based VP analyst Michael Warrilow Australia and New Zealand organisations are ahead in shifting system infrastructure to cloud and on par with the rest of the world in moving to software-as-a-service (SaaS).

However they are more reluctant when it comes to business process as a service (BPaaS), he said.
 
“There is opportunity for ANZ organisations to reengage with modern forms of outtasking, which will allow IT to focus on adding value in the move to digital,” said Warrillow.

Gartner’s ‘cloud shift’ research includes only those enterprise IT categories that can transition to cloud, within the application software, infrastructure software, business process services and system infrastructure markets. By 2025, 51 percent of IT spending in these four categories will have shifted from traditional solutions to the public cloud, compared to 41percent in 2022. Almost two-thirds (65.9 percent) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7 percent in 2022.
 
“The shift to the cloud has only accelerated over the past two years due to Covid-19, as organisations responded to a new business and social dynamic,” said Michael Warrilow, research vice president at Gartner. “Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.”
 
In 2022, traditional offerings will constitute 58.7 percent of the addressable revenue but growth in traditional markets will be much lower than cloud. Demand for integration capabilities, agile work processes and composable architecture will drive continued shift to the cloud, as long-term digital transformation and modernisation initiatives are brought forward to 2022.

Gartner says that in 2022, more than $1.3 trillion in enterprise IT spending is at stake from the shift to cloud, growing to almost $1.8 trillion in 2025, according to Gartner. Ongoing disruption to IT markets by cloud will be amplified by the introduction of new technologies, including distributed cloud. Many will further blur the lines between traditional and cloud offerings.
 
Enterprise adoption of distributed cloud has the potential to further accelerate cloud shift because it brings public cloud services into domains that have primarily been non-cloud, expanding the addressable market according to the researchers. Organisations are evaluating it because of its ability to meet location-specific requirements, such as data sovereignty, low-latency and network bandwidth, they said.