Global spending on cloud infrastructure rebounded in the third quarter of 2021 after its first quarterly decline since the pandemic led to a massive increase in cloud spending. According to researcher IDCIn the third quarter of 2021, spending on cloud infrastructure environments increased 6.6% year-over-year to $18.6 billion.
When the pandemic appeared on the horizon in early 2020, many organizations and technology companies planned massive cuts in spending on information technology, including the cloud. However, most companies quickly turned to optimism about the role of the cloud in the new normal for remote work and cloud-based virtual information technology. They ended up right. The main increase in cloud spending occurred in the second quarter of 2020, which saw a 38.4% year-over-year growth.
The cloud will continue to experience steady growth over the next 10 years. However, the speed of this growth will change over time, and it will change for various reasons. It is easy for analysts at large organizations to rely on historically accurate assumptions to predict future spending on the cloud, but these assumptions may prove incorrect in the future. There are new forces at work that will drive the speed of cloud spending from quarter to quarter, and most of these forces are not yet well understood.
Here are some assumptions that are potentially wrong:
Reducing traditional computing spending always turns to increasing spending on the cloud. I see many technology and business analysts making this assumption, and it seems to make sense. However, less spending on traditional (legacy) computing is not a good indicator that those dollars are going directly to cloud computing.
Typical reductions in traditional computing spending have nothing to do with traditional systems being replaced by cloud hosting or SaaS. Furthermore, the way you spend dollars on traditional systems is quite different from the way you spend on cloud-based systems, with investments in software and hardware made in larger chunks versus cloud computing utility-based pricing.
Cloud spending follows most IT spending. This is something a lot of people got wrong about cloud computing at the start of the pandemic. They have assumed that if IT spending is reduced, then cloud spending will also be reduced. While this makes sense, cloud computing spending is largely separate from IT spending patterns.
Most companies spend money on the cloud to respond to lower IT spending. Or, more often, the cloud is presented as a strategic investment. The pandemic has highlighted the strategic advantages of cloud computing because cloud computing can reduce or eliminate many of the risks surrounding a pandemic. For example, the cloud can remove applications and data from enterprise data centers that were subject to quarantine restrictions that businesses faced early in the pandemic. Later, more viable in 2021, spending on the cloud reflected a strategic need. The typical example is the cloud’s ability to drive more innovation directly related to the business and its ability to do so faster.
The cloud will continue to grow, although its growth rate will vary according to shifts in market priorities, as well as those of the enterprise. The trick is to understand how and why these shifts relate to actual cloud spending. We make a lot of assumptions about how moving parts affect spending. Many assumptions that are historically accurate are no longer true. It’s time to update our standards with today’s emerging cloud selectors.