Economic headwinds be damned, cloud migrations 'not stopping'

Don't listen to the claims of slowing growth – Gartner has the lowdown

Despite global economic concerns that are taking a bite out of confidence across much of the tech industry, mystics at Gartner say "cloud migration is not stopping."

Some $591 billion is projected to be spent globally by public cloud end users in 2023, with all of the variants growing by double digits.

"Current inflationary pressure and macroeconomic conditions are having a push and pull effect on cloud spending," said Sid Nag, Vice President analyst at Gartner. "Cloud computing will continue to be the bastion of safety and innovation, supporting growth during uncertain times due to its agile, elastic and scalable nature."

"Yet organizations can only spend what they have," Nag added. "Cloud spending could decrease if overall IT budgets shrink, given that cloud continues to be the largest chunk of IT spend and proportionate budget growth."

The big three cloud providers – Amazon, Microsoft and Google – last week reported slowing growth for their respective cloud sales operations following rapid and meteoric rises during the earlier stages of the pandemic.

Amazon CFO Brian Olsavsky reported the AWS cloud business moderating to a mid-20 percent growth rate as calendar Q3 progressed, and "customers are looking to save money versus their committed spend."

"We have options for them to do that. They can manage workloads better. They can switch to lower-cost products that have different performance profiles. They can switch to Graviton chips that have higher cost/performance ratios," he told investors late last week.

Despite these comments, Gartner thinks Infrastructure-as-a-Service will grow the fastest of the public cloud types, up 29.8 percent to $150 billion or so.

"Cloud migration is not stopping," said Nag. "IaaS will naturally continue to grow as businesses accelerate IT modernization initiatives to minimize risk and optimize costs. Moving operations to the cloud also reduces capital expenditures by extending cash outlays over a subscription term, a key benefit in an environment where cash may be critical to maintain operations."

So which areas of cloud might see the biggest impact as customers reassess spending priorities in light of inflation? Software and Platform-as-a-Service, says Gartner. PaaS is projected to swell 23 percent to $136 billion and SaaS is estimated to grow 16.8 percent to a little more than $195 billion.

"Higher-wage and more skilled staff are required to develop modern SaaS applications, so organizations will be challenged as hiring is reduced to control costs," said Nag. "But since PaaS can facilitate more efficient and automated code generation for SaaS applications, the rate of PaaS consumption will consequently increase."

"Despite growth, profitability and competition pressures, cloud spending will continue through perpetual cloud usage," Nag added. "Once applications and workloads move to the cloud they generally stay there, and subscription models ensure that spending will continue through the term of the contract and most likely well beyond. For these vendors, cloud spending is an annuity – the gift that keeps on giving."

Gartner also told us it expects Desktop-as-a-Service to grow to $3.1 billion next year versus $2.54 billion in 2022. Cloud business process services are forecast to reach $65 billion, up from $60.1 billion, and cloud management and security services is estimated to reach $41.6 billion, up from $34.1 billion. ®

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