70% Of Enterprise Infrastructure Offsite By 2018: Study

In five years, outsourced cloud services will dominate as companies abandon the on-premises model, says the telecommunications company CenturyLink.

Charles Babcock, Editor at Large, Cloud

November 15, 2013

5 Min Read

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The typical enterprise will run nearly 70 percent of its infrastructure in the cloud or other locations outside its own datacenter by 2018, according to a report released by Savvis, the cloud unit of CenturyLink, the third-largest telecommunications company in the US.

According to the report, "Global IT Trends: IT Outsourcing Fuels Business Growth," outsourcing will be driven by the need to produce modern business applications, many of which are designed to run in the cloud, like external settings. It also will be driven by a shortage of internal IT skills and the cost savings offered by the cloud and other outsourced environments.

The current ratio is 65 percent in-house infrastructure and 35 percent outsourced. Over the next four years, the ratio will make a "dramatic shift" to 31 percent in-house and 69 percent outsourced.

"Cloud is part of the picture -- but not the only part," said the study by Vanson Bourne, the research firm Savvis commissioned to conduct its annual survey on IT infrastructure. "Rather, organizations are moving to a complex mix of IT infrastructure models that include, but are not limited to, cloud." Bourne asked 550 IT decision makers in the US, Canada, the UK, Germany, Japan, Hong Kong, and Singapore about the future of their IT infrastructure.

[ Want more on Amazon's private cloud centers? See Amazon Expands Private Cloud-Like Option. ]

The study's conclusion fits with Savvis' long-held view of the future. Savvis came to cloud computing from the managed service side of the industry, where the outsourcer owns and runs the equipment underneath an important application -- say, ERP from SAP -- or manages a set of servers for a company that doesn't want to maintain them itself. The client continues to own and run the application. In addition, some IT infrastructure will continue to be placed in co-location services, in which a company's hardware and software are placed in cages at a site where they have high-speed access to network connections but are maintained by their owner, rather than the co-location provider.

Companies will maintain "a strategic mix of colocation, managed-hosting and cloud services," Savvis president Jeff Von Deylen said in an October press release on the report.

The survey also found a distinct increase in the use of cloud services. In the four years that Savvis has asked about the practice, the number of companies saying they use cloud services has risen 40 percent. In the 2013 study, 89 percent of respondents reported using some form of cloud services.

Cost containment or reduction was the most frequently cited reason for outsourcing, cited by 42 percent of respondents, but the authors also said some respondents reported they are no longer operating under a mandate to slash costs as part of their company's survival. In some instances, IT professionals report that they can achieve better service quality with outsourced cloud services than they can provide in-house. Thirty-six percent of respondents said they improved quality of service through an outsourced supplier; half said they were getting email and storage services from cloud suppliers.

Thirty-five percent said increased flexibility and scalability ranked high on the list of advantages to outsourced environments.

Like other participants in the cloud market, such as VMware or Eucalyptus Systems, Savvis found widespread investment in on-premises private cloud services. Unlike other observers, however, Savvis said the private cloud movement will peak in the next 12 months, followed by a decline in private cloud investment.

As private clouds work in a hybrid fashion -- in combination with a public cloud service -- more emphasis will shift toward the outsourced services, the study said. "Currently, the second most popular IT infrastructure is the in-house private cloud model. Usage starts to decline in 12 months -- exactly when the move to the outsourced cloud begins to take off." The use of external clouds, co-location, and managed services will exceed in-house private clouds in three years.

Also, the Savvis study found attitudes on security in the cloud are shifting in the cloud's favor. Thirty-two percent of respondents said security was better at their cloud provider than in-house. Thirty-four percent said finding the right mix of IT skills was a bigger issue than budget constraints.

In another interesting highlight, the study found that respondents who made the most extensive use of cloud and other outsourcing services also reported the highest expectations for increasing revenues. Those using cloud, co-location, and managed services frequently projected 5-10 percent or 10-15 percent growth in revenue over the coming 12 months, versus the 1-5 percent projected by respondents relying primarily on in-house infrastructure. The study's explanation: Companies that need to scale are more likely to make the most effective use of outsourced services.

In one additional respect, the study closely reflects CenturyLink's view of the world -- 65 percent of respondents said the service provider should own the underlying network. Such a concern troubles few users of the largest infrastructure-as-a-service provider, Amazon Web Services. The most direct private-line links to its cloud datacenters are provided through private carriers at nearby Equinix datacenters.

The crucible of cloud, big data, and distributed computing is hell on systems. Will application performance management cool down complexity -- or just add fuel to the fire? Also in the new, all-digital APM Under Fire special issue of InformationWeek: Cloud industry heavyweights discuss the pros and cons of OpenStack support for Amazon APIs. (Free registration required.)

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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