Enterprise spending on cloud has grown 38% in 2014, and IT now controls 80% of that budget, finds Verizon study.

Charles Babcock, Editor at Large, Cloud

October 30, 2014

4 Min Read
(Source: Verizon "State of the Market: Enterprise Cloud 2014" report)

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Verizon's second annual "State of the Market: Enterprise Cloud" report, released Tuesday, reports that 71% of businesses expect to have public-facing applications in the cloud by 2017.

One value of the Verizon report is its ability to track changes from year to year. For example, in 2013 it reported cloud storage was growing at a rate 2.5 times that of virtual machines deployed. Memory capacity, it said in 2013, was growing even faster, at 2.9 times the rate of VMs deployed, reflecting perhaps an increasing concern for performance. In the 12 months ended July 2014, the rate of growth of storage per VM increased six times over the number of VMs deployed, and the capacity of memory had grown to "a staggering 12 times" the rate of VMs deployed.

The Verizon report also is broader than vendor surveys that primarily reference their own customer base. While Verizon draws data from its own enterprise-level cloud customers, which produced 181 responses for this year's report, it also included 451 Research's 988 responses from cloud users (through May this year); The Harvard Business Review's Analytic Services report, "Business Agility in the Cloud" in July, with 527 respondents; and Forrester Research, Accenture, IDC, and Gartner reports on cloud computing. As such, it tends to offer more of a composite picture than some surveys and reports.

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And if it was once true that non-IT departments led a company's decision-making on adopting cloud, that predominance of shadow IT is no longer the case. Not only has the enterprise spend on cloud grown by 38% over the last year, IT's share of that spending now reaches 80% of the total. "Over half is managed directly by the CIO," said the report, borrowing that conclusion from a study by the 451 Research Group earlier this year. So much for concern about the chief marketing officer taking over the CIO's budget.

Market researcher IDC supported that finding. Not only is spending on the cloud growing, but it represents a rapidly increasing part of the overall IT budget. Organizations adopting cloud services expect to spend "54% of their IT budget on cloud in the next two years," Verizon said, citing a recent IDC report.

The debate over public versus private cloud "is now moot," Verizon reported, without necessarily making it clear exactly what the outcome had been. Debating the merits of one versus the other "is insufficient to describe the complex decisions that companies are facing when selecting a delivery model," it said. In other words, companies don't expect all their needs to be met by one or other. If anything, they're mapping out a future that will include both. "We've seen the rigor of the selection process increase noticeably in the last 12 months," Verizon concluded, which suggests companies have a clearer idea of what they're looking for as they venture into the public cloud.

Verizon also noted increased use of the term virtual private cloud, "indicating a blurring of the line separating public from private cloud." Virtual private cloud, however, usually means a more private implementation of enterprise servers inside a public cloud provider, although not necessarily in a multi-tenant environment.

While infrastructure-as-a-service is viewed as an implicitly efficient way of running computing, only 14% of those contacted said that saving money was a primary motive for using cloud computing. Rather, 32% said the primary perceived benefit of the cloud was agility, not cost savings, according to the report.

Commodity cloud is a highly visible subject in the marketplace, but the "the most interesting work is happening on the various types of enterprise-class cloud available."

That appears to be Verizon's own conclusion, as no source was named for it. Verizon earlier this year said it would continue to offer commodity cloud services, but it was putting more emphasis on enterprise-level cloud services. For example, in late April, it announced Secure Cloud Interconnect to give enterprise customers the ability to connect workloads in different clouds via a private-line IP service.

A surprising 41% of cloud users say they are now relying on public cloud services to run mission-critical workloads, whereas in the past they've emphasized public facing websites and informational services. By mission-critical, respondents mean things such as e-commerce for retailers.

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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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