2017 IT Budgets: One-Third Goes To Cloud, Hosting Services

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Enterprises are expecting to spend about a third of their total budgets on cloud computing and hosted services in 2017, compared to about 28% currently, according to a new report from 451 Research. The growing emphasis on the cloud means a shift for internal IT roles.

Infrastructure-as-as-Service (IaaS), as well as application, management, and security services are among the public cloud and hosting services CIOs and their IT departments plan to put 34% of their tech dollars in 2017.

The report, "The Voice of the Enterprise: Hosting and Cloud Managed Services -- Organizational Dynamics" released Nov. 15, was based on interviews with 580 IT professionals conducted between August and September of this year.

While a significant portion of IT budgets -- about 30% -- goes to infrastructure spending, the 451 report finds that enterprises are spending the other 70% of their money on a wide range of services, including:

Enterprises are moving away from the older, ad hoc approach to cloud spending, to a new paradigm that's more top-down and lead by the upper management and CIOs, according to Liam Eagle, a research manager at 451 and the lead author of the report. The shift is the result of business leaders seeing the benefits to the technology, and wanting to take charge of it, Eagle wrote.

"From a broad point of view, the drivers for cloud adoption are roughly the same as the basic value propositions for cloud -- flexibility, the shift from capex to opex, possible cost benefits, etc… ," Eagle wrote in an email to InformationWeek.

With all this spending on cloud and services, what are enterprises doing with the technology?

In terms of Software-as-a-Service (SaaS) applications, Eagle sees most of the spending going toward email, collaboration and productivity, website hosting and web presence, CRM, file storage, and industry-specific applications. In the next 12 months, businesses plan to implement cloud services such as file storage, data analytics, business intelligence, big data, database and data warehousing, as well as app development tools and platforms, he added.

With this much of the budget flowing to cloud and outside hosting services, the technology is changing the way IT does its job. In his email, Eagle notes that during interviews 451 conducted with IT managers, CIOs, and others found that the emphasis on cloud means learning to do the job differently, and that takes time and effort.

"One of the obvious conclusions is that IT practitioners are having to learn to apply the skills they already have in cloud-based environments," Eagle wrote. "So, if they're focused on storage architecture, they have to figure out how to put those skills to work in the cloud. If they're administering databases, they'll have to figure out how to do that work in the cloud."

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One of the key barriers to greater cloud adoption is the learning and training that goes with the technology. In other cases, IT pros have to learn new skills, such as managing the vendors providing the services. However, there's also opportunity, with about 9% of those in the survey reporting that they will be adding headcount to their departments to manage these relationships, Eagle wrote.

In terms of who is providing the services, the 451 report found that public cloud providers are used by nearly 70% of those surveyed, while 26% use managed hosting providers. When it comes to IaaS and SaaS, the research showed that large, hyperscale vendors are dominating, especially ones that can offer bundled services to businesses.

In his email, Eagle wrote that the usual suspects are dominating the IaaS market, and these include Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and IBM SoftLayer. For SaaS, Salesforce is dominating in the CRM space, while Microsoft's Office 365 holds the best position in the productivity and email category, and DropBox is the preferred choice in file services and storage.