Cloud computing spending surges Cloud computing spending surges

With strong tailwinds from high-growth companies and first-generation business-savvy CIOs, revenue from sales of cloud computing products and services are poised to surge from their current base of approximately USD 20 billion to nearly  USD 150 billion by 2020, accounting for 8% of all technology spend—this according to The Five Faces of the Cloud study released by Bain & Company, the global business consulting firm.

“Cloud computing is at the intersection of two very powerful trends that have been playing out for some time: greater use of capability sourcing across the business value chain and the shift from capital intensive computing models to variable-use ones,” said Michael Heric, a Bain partner and lead author of the study. “Once financial and strategic value proves to be repeatable, cloud will become a standard part of the business toolkit.”

In Bain’s survey of 494 North American CIOs and IT decision-makers, representing companies of all sizes across a wide range of industries, there is clear evidence that broad-based cloud adoption is underway. To date, just 10% of companies have driven nearly 50% per cent of the market for cloud solutions. This is changing: over the next three years, nearly 65% of the approximately USD 20 billion in growth in this market will come from companies that make little or no use of cloud today.

Other findings from Bain’s CIO survey and in-depth interviews include:

  • Faster growing companies (greater than 10% per year) use 144% more cloud services than slower-growing companies.
  • A CIO that has entered their position within the last year will have 141% more of their environment in the cloud than a longer tenured CIO (greater than six years).
  • CIOs with diverse business experience (entrepreneurs, business school graduates, business unit operators) use 82% more cloud services than those who have spent their professional careers predominantly in IT.
  • Cloud adoption is accelerating as the technology comes down the cost curve. Bain estimates that in the next three to five years, for certain workloads, cloud pricing will be 30% to 40% lower than legacy technology.

Bain has identified five distinct cloud user profiles, enabling providers to better tailor their offerings while addressing a broader spectrum of companies:

  • TransformationalEarly adopters that are already heavy users of cloud computing. They are looking for comprehensive, game-changing solutions that will enable their business to grow in ways not possible without cloud.
  • HeterogeneousCompanies that typically have an exceptionally diverse mix of legacy systems and newer technologies. While their CIOs understand the compelling value that cloud can provide, they must use the benefits with the limiting realities of their environments.
  • Safety-conscious—Companies that are particularly concerned with the security and reliability of their IT environments. Private cloud and hybrid public-private cloud models have the most appeal.
  • Price-consciousBottom-line focused companies that purchase cloud technologies and services primarily for the cost savings. They are less interested in the strategic benefits that cloud can offer than they are with achieving a 15 – 20% reduction in cost.
  • Slow and steady—These companies, for a range of reasons, do not yet appear ready to adopt cloud computing in a meaningful way, although they express interest in exploring offerings if a provider can slowly and steadily take them down the migration path.

“Cloud providers have thus far been largely focused on developing solutions for the earliest adopters,” added Heric. “There is no guarantee that today’s cloud leaders will remain on top.  If they cannot broaden the appeal of their solutions to meet the needs of new cloud adopters, other providers will step in to fill the void.”


Rushika Bhatia Editor

Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of SME Advisor magazine - the flagship title of CPI Business. She is passionate about infographics – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.

More in News, Tech
Sage Software reaches out to SMEs

The company recently held Sage Customer Day, to help SMEs get better insight on Sage’s...