COVID-19’s Impact on Enterprise Cloud Adoption
While public cloud adoption has been growing rapidly, it’s not surprising that 2020 brought it to a new level as the global pandemic made “remote” the default for schooling, working and meetings.
What’s interesting is how cloud adoption is happening. Enterprises adopting public cloud are rarely forming a partnership with a single provider. Instead, they’re using multiple providers while continuing to invest in hybrid cloud technologies that support existing capital investments or private cloud. Let’s dive into the data to better understand how this is playing out.
Coming into 2020, the general consensus was that approximately 80 percent of enterprise workloads were expected to be in the cloud. The breakdown: 41 percent public cloud, 20 percent private cloud and 22 percent hybrid cloud.
This was also confirmed by a more recent O’Reilly Survey which found that “More than 88 percent of respondents use cloud in one form or another. Most respondent organizations also expect to grow their usage over the next 12 months.”* This survey also confirmed that a mix of public clouds dominates the adoption curve, but 49 percent of these respondents continue to run traditional applications on prem. Additionally, a slight majority of respondents, 54 percent, are using more than one cloud. This helps shape our understanding that overall adoption appeared to be increasingly moving into 2020 with a healthy amount of workloads for enterprises in more than one cloud and on prem.
One other interesting note regarding this O’Reilly survey is that 65 percent of respondents cited weaknesses in cloud-based security as the reason they were not moving more infrastructure to the cloud.
Understanding the general sentiment of cloud adoption pre-pandemic, let’s examine how COVID-19 is impacting IT spending overall. According to IDC (International Data Corporation) in their COVID-19 impact survey from June 2020 (early in the pandemic), 40 percent of respondents were forecasting a lower IT spend, and 54 percent indicated either no change or an increase in their spend. For 2021, 66 percent indicate no change or a spending increase overall.
*This is a breakdown of all cloud services including IaaS, PaaS and SaaS and also includes collaborative services like Google Workspace and Office 365.
As we already know, the COVID-19 pandemic has shifted the way a significant number of us work and learn. This shift appears to have accelerated and increased businesses’ expected spend in cloud technology, even with overall IT spending decreasing for 2020. New research from Gartner argues that this accelerated shift in cloud spending, due to the pandemic, is going to grow. Specifically, “The proportion of IT spending that is shifting to cloud will accelerate in the aftermath of the COVID-19 crisis, with cloud projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020,” according to Sid Nag, Gartner’s VP of research.
|Cloud Business Process Services (BPaaS)||45,212||44,741||47,521||50,336|
|Cloud Application Infrastructure Services (PaaS)||37,512||43,823||55,486||68,964|
|Cloud Application Services (SaaS)||102,064||101,480||117,773||138,261|
|Cloud Management and Security Services||12,836||14,880||17,001||19,934|
|Cloud System Infrastructure Services (IaaS)||44,457||51,421||65,264||82,225|
|Desktop as a Service (DaaS)||616||1,204||1,945||2,542|
Figures represent US dollars in billions
BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service
Note: Totals may not add up due to rounding.
Source: Gartner (November 2020)
Nag says, as a result of the pandemic, organizations have prioritized three concerns:
- Preserving cash and optimizing IT costs.
- Supporting and securing a report workforce.
- Ensuring resiliency.
Cloud adoption continues to accelerate in the face of COVID-19, even with some sectors seeing a drop in overall IT spending. The latest data from Gartner demonstrates that growth in cloud adoption is weighted more heavily in PaaS, SecOps, IaaS and DaaS for 2020, and projects a growth rebound occurring in SaaS for 2021.
Surprisingly, COVID-19 impacted growth in SaaS negatively for 2020. Despite the assumption that the “Zoom effect” would drive this sector up, I speculate that this difference is due to the massive impact Salesforce, O365 and Google Workspace have on the overall SaaS market numbers. Specifically, we know the overall employment rate is still down from its high point in 2019 and is making a slow comeback, which is expected to accelerate in 2021 as more vaccines are deployed.
In summary, COVID-19 has impacted IT budgets by as much as 7.7 percent. The pandemic has put pressure on IT organizations to cut costs and improve operational efficiencies. It’s also clear that the portion of IT’s budget remaining for 2021 is aggressively shifting toward cloud computing. Why?
One big reason is COVID-19. Cloud computing enables organizations to be nimble across all their business units in four core areas:
- Modernizing infrastructure, increasing agility, manageability and security.
- Improving operations, so companies can adapt quickly to change.
- Supporting radically different ways to organize and gain insights to data, which allows for faster and more confident decision making.
- Leveraging the cloud to radically improve customer experiences supporting fast measurement, response and service improvement cycles never before achieved.
Evidence is everywhere of companies benefiting from investments in cloud computing, from Zoom’s rise in the market to retailers shifting to contactless service. Companies who invested early in cloud are nimble organizations and were able to pivot their business models quickly in this pandemic. Cloud adoption is accelerating and those who have been late to adopt are playing catchup, but the benefits are more clear than ever before.