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Hosting, Cloud Services to Lead Total Enterprise IT Spending Growth

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Edward GatelyHosting and cloud-services spending among enterprises is growing, both in dollar-value terms and as a portion of overall IT spending, across nearly all sectors in terms of company size, geography and vertical market.

That’s according to 451 Research’s latest Voice of the Enterprise: Hosting and Cloud Managed Services, Budgets and Outlook study. Based on research conducted in January and February with about 1,000 IT professionals around the world, the quarterly study combines 451’s analysis with survey responses and interviews from a panel of more than 60,000 senior IT buyers and enterprise technology executives.

451 Research's Liam EagleLiam Eagle, 451’s research manager of hosting and cloud services, tells Channel Partners the trend will lead to new opportunities for the channel.

“As part of that transformation, hosting and cloud services spending is trending toward infrastructure and application services packaged with value-added managed services and security services,” he said. “We believe that is where a lot of the opportunity for the IT channel will lie in the future – supporting the consumption of hosted infrastructure and applications by enterprises that may require assistance with the operational management or security of those resources, including being a complimentary third party to the infrastructure or application subscription.”

Enterprises this year expect growth in their hosting and cloud services spending to outpace growth in overall IT spending by 25.8 percent to 12 percent. Among large businesses (1,000-9,999 employees), an average of 33.3 percent growth is expected in hosting and cloud services spending.

Among respondents, 88 percent expect to increase their hosting and cloud services budgets in 2017 versus 2016, compared to 70 percent that expect to increase total IT budgets year over year.{ad}

Just 9.5 percent expect a decrease in hosting and cloud services spending, compared to 22.3 percent that expect a decrease in total IT spending, according to the study.

The increased spending is being driven by: migration of workloads from on-premises environments to the cloud; adding new resource capacity due to business growth; new IT initiatives; and businesses buying additional services they previously did not have. These drivers vary significantly by company size, with small businesses strongly emphasizing new capacity due to growth, and medium and very large businesses primarily focused on migrating on-premises workloads to the cloud.

Public cloud and SaaS providers such as Microsoft Azure and Amazon Web Services are being adopted by the largest portion of respondents, according to the study. However, about 50 percent of respondents indicate they are …

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… using a vendor outside of the top 10.

Azure and AWS lead respondents’ budget allocation by a significant margin, with Azure (24.8 percent) leading AWS (20.2 percent). Respondents on average plan to increase spending for both of these vendors, and increased spending also is planned with several other vendors, including public cloud and managed hosting vendors in aggregate.

However, customers’ plans to increase spending for any individual vendor trail hosting and cloud spending increases overall, suggesting that over time enterprises will spread their growing hosting and cloud services budget over a larger number of providers.{ad}

“Companies are spending with large numbers of individual vendors, although there is a fairly strong appetite for the ‘one-stop shop’ type of provider, who can source multiple products,” Eagle said. “For service providers in the hosting and cloud services space – especially those medium-sized and smaller providers, and those in the channel – it will be very important to think about whether the products they offer are point solutions that fit into a large set of other services, or if they can offer some additional value by helping customers to get their arms around the management of vendors.”


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