IT Budgets: Traditional Still Bigger than Cloud

When it comes to IT infrastructure, organizations may be putting more investment dollars towards the flexibility and agility offered by the cloud, according to Gartner's most recent forecast of IT spending. But traditional IT is still getting most of the money, and will make up 72% of the addressable revenue for enterprise IT markets in 2022.

Gartner's new forecast shows that cloud spending is accelerating, with 28% of spending in enterprise IT markets shifting to the cloud by 2022, up from 19% in 2018.  

"The shift of enterprise IT spending to new, cloud-based alternatives is relentless, although it is occurring over the course of many years due to the nature of traditional enterprise IT," said Michael Warrilow, research vice president at Gartner, in a statement. Many organizations see benefits in cloud's on-demand capacity and pay-as-you-go pricing, he said.

Gartner said that the largest cloud shift before 2018 was in software as a service -- application software -- particularly customer relationship management (CRM), where now more spending goes to cloud-based software than traditional software.

It's not hard to draw a line from Gartner's statement to the rise of companies such as Salesforce.com, which has not only built its own online CRM platform, but has also created an enormous ecosystem for other apps that work with it. Salesforce reported just under $10.5 billion in revenues during the fiscal year ended January 31, 2018.

Gartner says that SaaS will continue to garner more cloud spending than other categories will between now and 2022, and more segments included in the SaaS category will grow including office suites, content services, and collaboration services.

A change may also be on the way for infrastructure and infrastructure software, too. Gartner says that by 2022 nearly half of the addressable infrastructure revenue will go to cloud as the infrastructure currently deployed reaches renewal/replacement dates. Gartner says system infrastructure will be the market that will shift the fastest between now and 2022.

"The shift to cloud until the end of 2022 represents a critical period for traditional infrastructure providers, as competitors benefit from increasing cloud-driven disruption and spending triggers based in infrastructure asset expiration," Warrilow said. "As cloud becomes increasingly mainstream, it will influence even greater portions of enterprise IT decisions, particularly in system infrastructure as increasing tension becomes apparent between on- and off-premises solutions."

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