Technology | Media | Telecommunications

Friday, February 23, 2018

Upside Opportunity for Blockchain Professional Services

Demand for blockchain solutions are accelerating across the globe. Given the maturity of the technology and the need for specialized skills and experience, the majority of blockchain spending in the near-term will be on business and technology services.

According to the latest global study by International Data Corporation (IDC), worldwide spending on blockchain services growing from $1.8 billion in 2018 to $8.1 billion in 2021 -- achieving a compound annual growth rate (CAGR) of 80 percent.

Blockchain Market Development

Distributed ledgers technology (DLT) allows new transactions to be added to an existing chain of transactions using a secure, digital or cryptographic signature. To develop, build, deploy, and maintain these distributed ledgers and smart contracts, enterprises are turning to professional services firms, systems integrators, and application developers.

"IDC believes the short-term blockchain services opportunity is small but strategically important, as developers, vendors, and their customers work out the standards and protocols and promote blockchain capabilities as a 'trust and scale' alternative to traditional database, ETL, and OLTP applications," said Michael Versace, research director at IDC.

Over the long-term horizon, blockchain services -- including business consulting, IT consulting, custom development, and managed services -- have the potential to become foundational to a new generation of enterprise IT infrastructure, resulting in a growing demand for consultants and developers.

As blockchain begins to find its way into corporate strategies and business processes, a variety of business and IT consulting, development, platform, outsourcing, and educational services will be needed. According to the IDC assessment, these fall into three market segments, as follows.

Project-oriented services consist of business consulting services that define enterprise strategy and readiness, identify high-value applications and profit pools, and metrics for value creation using blockchain technologies; IT consulting services that advise on platform selection, data and system architecture, application performance, capacity and business continuity planning; system integration for the planning, design, implementation and management of blockchain solutions; and custom application development to design, build and test new blockchain applications.

Outsourced services consist of business process outsourcing for the execution of key business activities, business processes, or entire business functions by an external (third party) services provider or outsourcer; and other outsourced services such as hosted application management, blockchain infrastructure outsourcing, and hosted infrastructure services.

Support services which consist of support and training services including hardware and software deployment and support services, content development, training processes to support enterprise, partner, or end-user adoption of blockchain networks and technologies.

Outlook for Blockchain Developer Demand

"IDC expects to see dramatic growth in the blockchain developer marketplace over the next several years," noted Versace. "By 2021, the number of consultants and developers in blockchain services will have grown tenfold from current estimates."

Wednesday, February 21, 2018

Technology, Media and Telecom Trends Q1-Q4 2017

Last year may be remembered for many years to come, for a variety of reasons, including significant market transactions. Mergermarket, an Acuris company, has released its global mergers and acquisitions (M&A) roundup report of the Technology, Media and Telecom (TMT) sector for the whole year.

In 2017, global dealmaking in the TMT sector saw 3,389 deals worth a combined $498.2 billion. Although total deal value fell 26.3 percent compared to the $ 676.3 billion tallied in 2016, a new Mergermarket record by deal count was set, increasing by 233 transactions over 2016 (3,156 deals) to reach an all-time high.

Technology Sector Market Development

The latest market trends highlight the increasing influence of technology in just about everything. In fact, senior executives in various industries have been under pressure to incorporate digital transformation projects, in order to survive and prosper in the evolving global marketplace.

This has already forced company consolidations in long-standing industries such as Consumer; Pharma, Medical & Biotech; and of course Media. Half of all deal activity in TMT was driven by M&A in the Computer Software sub-sector alone, which accounted for 1,739 transactions (worth $128.8 billion) – 2.8 times that of eCommerce, which saw the second-highest deal count with 629 transactions (worth $85.1 billion).

Software was one of the few sectors where deal count actually rose in 2017. By deal value, software was responsible for 25.7 percent of total TMT deal value. But there were no software deals in 2017 anywhere in the globe that reached mega-deal (>$10 billion) status.

Private equity activity within the software sector also set a new record. While disclosed deal values for software buyouts ended with an aggregate $38.8 billion -- a 16.4 percent decrease from 2016 -- 2017 was still the third-highest value on record, with deal count hitting a peak of 438 transactions. That's 123 more than in 2016, which had previously held the record.

Global Media Sector Highlights

Media M&A had already been a volatile sector as a whole -- including entertainment, advertising, publishing, and broadcast -- struggled over the past few years to deal with the massive onslaught of changes brought on by technology advances. Moreover, the sector now finds itself grappling with the effects of several industry governance reform movements.

Global figures for the sector recorded $131.2 billion, a decrease of 28.9 percent compared to the $184.4 billion in 2016, though deal count was up by eight transactions to 568 over the same period. The U.S. market accounted for the bulk of the share of global media dealmaking, comprising 78.9 percent of total deal value within the sector, and just under 30 percent of total deal count.

At the same time, this was 22.4 percent below total value in the U.S. in 2016 ($133.3 billion) and 17 fewer deals. In fact, the media sector deal value fell across the globe, by 52.5 percent in Europe to $13.6 billion in 2017, by 26 percent in Asia-Pacific (APAC) to $13.4 billion, and by 85.3 percent in the rest of the world to $600 million.

By deal count, however, activity rose in Europe and APAC, by 22 transactions over 2016 to 228 total in Europe and by six to 135 total in APAC.

TMT Market Outlook for 2018

According to the Mergermarket assessment, the structural changes taking place across industries that were influenced by technology sector advances are likely to continue shaping the global commercial landscape for dealmaking well into 2018.

While deal values may continue to fall, deal count in sectors, such as technology, are set to rise further. The sector will likely add more pressure to other traditional sectors to consolidate and battle over high-value targets, despite political and regulatory uncertainty.

Tax reform in the U.S. market, which resulted in a sizable cut to the corporate rate, is also widely anticipated to spur more M&A transactions as companies look to invest more on potential new deals.

However, with interest rate hikes projected for 2018, this could also restrain deal values, driving them downward. Meanwhile, the overall TMT deal count momentum is unlikely to be affected, as it continues on the path of ongoing growth.

Monday, February 19, 2018

Worldwide ICT Investment will Reach $4 Trillion in 2018

Information and communications technology (ICT) is an enabler of economic progress, and a driving force of the Global Networked Economy. Those organizations that have mastered the applications of next-generation technologies are making waves of market disruption everywhere. That said, expect more of the same, at an accelerated pace in future.

Worldwide spending on ICT will be nearly $4 trillion in 2018, according to the latest global market study by International Data Corporation (IDC). Ongoing growth will be driven by enterprise investment on cloud services, software and Hybrid IT infrastructure.

Global ICT Market Development

The consumer market will account for more than $1.5 trillion in ICT spending in 2018 and will deliver more than one third of all worldwide spending throughout the forecast period. Consumer spending will also experience the slowest growth over the forecast period with a CAGR of 1.2 percent. Roughly 80 percent of consumer spending will go to devices and mobile telecom services.

Banking, discrete manufacturing, telecommunications, and professional services will be the four largest industries for ICT spending in 2018 at more than $900 billion combined. While all four industries will invest heavily in applications, infrastructure, outsourcing, and telecom services, spending levels will vary depending on industry needs.

Banking will invest the most in IT outsourcing and project-oriented outsourcing ($115 billion combined) while telecommunications spending will be led by infrastructure purchases ($85 billion). Professional services and banking will experience the fastest growth in ICT spending with five-year CAGRs or 5.9 percent and 5.2 percent, respectively.

The United States will see $1.3 trillion in ICT spending in 2018 making it the largest geographic market this year and throughout the forecast, with spending expected to grow at a CAGR of 3.6 percent. China will be the second largest market for ICT spending at $499 billion this year with solid growth (5.2 percent CAGR) forecast through 2021.

Japan, the UK, and Germany will round out the top five countries for ICT spending in 2018. The countries that will experience the fastest ICT spending growth over the 2016-2021 forecast period are the Philippines (7.5 percent CAGR), India (7 percent CAGR), and Peru (6.7 percent CAGR).

"The growth of technology spending in the U.S. professional services industry is propelled by the tech-savvy firms that comprise it. Meanwhile, banks and retailers share the common desire to deliver a delightful, cohesive, channel-agnostic customer experience. These initiatives are enabled by technology investments to help organizations unite their physical and online worlds," said Jessica Goepfert, program director at IDC.

In terms of company size, the small office category will account for 7 percent all ICT spending throughout the forecast period. Most of this spending (around $100 billion per year) will go toward fixed and mobile telecom services, while devices will also be a significant spending category.

On the other end of the spectrum, very large businesses will account for more than 50 percent of all ICT spending throughout the forecast. These businesses will focus the majority of their spending on IT outsourcing, project-oriented outsourcing, applications, and infrastructure as they pursue their digital transformation strategy.

The spending patterns for small businesses will closely resemble those of the small office category with slightly more spending going toward applications and outsourcing. Medium and large businesses will experience more balanced spending across all technology categories.

Outlook for Global IT Investments

Spending on information technology (IT) will reach $2.16 trillion this year, led by business and consumer spending on devices, applications, IT outsourcing, and project-oriented outsourcing -- including application development and system and network implementation.

In addition, more than $300 billion will be spent on business process outsourcing and business consulting services this year. Telecommunications spending is forecast to be $1.5 trillion this year, with 95 percent of the total going to fixed and mobile telecom services.

Mobile phones will be the largest segment of technology spending at nearly $500 billion in 2018, followed by mobile data and mobile voice at more than $400 billion each.

Thursday, February 15, 2018

Why Investment in Blockchain Applications will Triple

Distributed ledger technologies, or blockchain, is gaining momentum across the globe. What's the appeal to apply the new eCommerce related benefits? There's no proprietary owner or administrator. As a result, interest in open blockchain technologies -- such as Hyperledger -- are attracting many new ecosystem participants.

According to the latest global market study by International Data Corporation (IDC), Western Europe will be the second largest region at a worldwide level, starting from around $200 million in 2017, including all the experimentation projects.

Blockchain Technology Market Development

The initial investment in proof-of-concept use cases will nearly triple the spending in 2018, to reach $1.8 billion in 2021. There is interest in blockchain across industries, with the compound annual growth rate (CAGR) expected to be 66.6 percent during 2016–2021.

"During 2017 many companies across a wide range of industries started to understand the feasibility, sustainability, and potential deployment of blockchain," said Carla La Croce, research analyst at IDC. "2018 will be the year of blockchain."

Blockchain spending will be driven by the financial sector (46.7 percent of 2018 spending), led by the banking industry, which will account for around $260 million of the total.

The second largest spender will be the distribution and services sector (nearly $120 million in 2018), with the retail and professional services industries as the largest, while the manufacturing and resources sector ($112 million in 2018) will be driven by the discrete and process manufacturing industries.


IDC expects the highest growth to be in telecommunications (79.1 percent CAGR), professional services (77.2 percent CAGR), and healthcare (76.7 percent CAGR).

Overall, cross-border payments and settlements will see the largest spending in 2018 (nearly $70 million), followed by regulatory compliance ($66 million) and asset or goods management ($61 million).

From a technology perspective, hardware will take a very small share of spending, with the major investments in services, which in 2018 will account for around 68 percent of Western European blockchain spending; the two main components, IT services and business services, will be well balanced across the forecast.

Outlook for Blockchain Software Spending 

Software will account for less than a quarter of spending, with the blockchain platform the main driver, and one of the fastest growing categories overall, along with security software.

"Blockchain is a great opportunity for many companies to transform inefficient processes into efficient and secure ones. In particular, blockchain is seen as a broad digital transformation enabler that can empower new business outcomes," said La Croce. "Opportunities are huge, and investments are needed in terms of looking for new use cases, keeping a strategic interaction between vendors and end users, and recruiting blockchain talent.

Wednesday, February 14, 2018

Retailers Raise Investment in Artificial Intelligence Apps

The common goals of artificial intelligence (AI) in computer programs can be described as problem-solving and task completion. In general, these productivity enhancements are intended to either replace or complement human functions.

In particular, AI has a significant transformative potential for most retailers, with a potential that's based on changes already underway within the retail industry, which are making AI apps more applicable.

Retailer AI Application Market Development

According to the latest worldwide market study by Juniper Research, global retailer spending on AI will reach $7.3 billion per year by 2022 -- that's up from an estimated $2 billion in 2018, as retailers target new avenues to increase personalization of the customer experience.

The study found that retailers will heavily invest in AI tools that allow them to differentiate and improve the services they offer customers. These range from automated marketing platforms that generate tailored, timely offers, to chatbots that provide instant customer service.


The Juniper market study also found that spending will be strongest in customer service and sentiment analytics, where AI can be applied to understand customer reaction to the products purchased and the service received.

This will prove to be a key tool for retailers seeking to improve their customer experience. Retailer spending in 2022 will be shared as follows:

  • Customer Service & Sentiment Analytics - 54 percent
  • AI-based Automated Marketing - 30 percent
  • Demand Forecasting - 16 percent


Juniper also predicted that savvy retailers will use AI insights to design and target new product ranges, as well as to create promotional offers.

"Retailers are looking to replicate the success of Amazon in making AI a core part of their operations, with retailers increasingly turning to solutions such as AI-optimised pricing and discounting, as well as demand forecasting," said Nick Maynard, analyst at Juniper Research.

Outlook for New Growth in Retail AI Apps

The research found that AI-backed demand forecasting is increasingly becoming a key tool for retailers. With the advent of specific days for shopping, such as the Black Friday phenomena, understanding customer demand and correctly planning based on this is more important than ever.

Juniper believes that retailers must invest in this area in order to stay competitive, particularly in low-margin retail segments. It noted that the cost of AI tools, currently uneconomical for many players, will drop by 8 percent over the next 4 years, helping realise a 300 percent increase in software spend.

Friday, February 09, 2018

Global Big Data Analytics Challenges and Opportunities

Establishing goals for a new digital transformation project is often the easier part of the process. In contrast, moving the people within an organization to act on the execution is more likely to be the difficult part of the change management process. Big data and analytics adoption is a case in point.

A worldwide survey of organizations by Gartner showed that 91 percent of organizations have not yet reached a transformational level of maturity in enterprise data and analytics -- despite this area being a number one investment priority for CIOs and CTOs in recent years.

Data and Analytics Market Development

"Most organizations should be doing better with data and analytics, given the potential benefits," said Nick Heudecker, research vice president at Gartner. "Organizations at transformational levels of maturity enjoy increased agility, better integration with partners and suppliers, and easier use of advanced predictive and prescriptive forms of analytics. This all translates to competitive advantage and differentiation."

The global survey asked respondents to rate their organizations according to Gartner's five levels of maturity for data and analytics. Gartner analysts found that 60 percent of their survey respondents worldwide rated themselves in the lowest three levels.

The survey revealed that 48 percent of organizations in Asia Pacific (APAC) reported their data and analytics maturity to be in the top two levels. This compares to 44 percent in North America, and just 30 percent in Europe, the Middle East, and Africa (EMEA).

The majority of respondents worldwide assessed themselves at level three (34 percent) or level four (31 percent). Twenty-one percent of respondents were at level two, and 5 percent at the basic level, level one.

But here's the most puzzling finding, only 9 percent of organizations surveyed reported themselves at the highest level, where the biggest transformational benefits are likely to occur for the enterprise.

According to the Gartner assessment, acquiring new technology isn't always essential to reach transformational levels of maturity in data and analytics. First, CTOs and CIOs must focus on improving how people and processes are coordinated inside their organization.

Improving process efficiency was by far the most common business problem that organizations sought to address with data and analytics, with 54 percent of respondents worldwide marking it in their top three problems.

Enhancing customer experience and development of new products were the joint second most common uses, with 31 percent of respondents listing each issue.

The survey also revealed that, despite a lot of attention around advanced forms of analytics, 64 percent of organizations still consider enterprise reporting and dashboards their most business-critical applications for data and analytics.

In the same manner, traditional data sources such as transactional data and logs also continue to dominate, although 46 percent of organizations now report using external data.

Barriers to Progress with Big Data Analytics

Organizations that participated in the survey reported a broad range of barriers that prevent them from increasing their use of data and analytics technologies. That said, organizations tend to experience a different set of issues depending on their geography and current level of maturity.

However, the survey identified the three most common barriers as: defining data and analytics strategy; determining how to get value from projects; and solving risk and governance issues.

In terms of infrastructure, on-premises deployments still dominate globally, ranging from 43 to 51 percent of deployments depending on use case. Pure public cloud deployments range from 21 to 25 percent of deployments, while hybrid environments make up between 26 and 32 percent.

Wednesday, February 07, 2018

How 5G Mobile Services Enable New M2M Apps

Being first-to-market with the latest wireless infrastructure can help drive local economic development. That said, according to industry analysts, the introduction and deployment of 5G communication services will take a different path to market.

Therefore, mobile network operators cannot rely on previous methods of implementing 4G networks. 5G needs ultra-low latency at the edge. A reduction in network power consumption is also a key requirement.

5G M2M Market Development

According to the latest worldwide market study by Juniper Research, the total number of cellular machine-to-machine (M2M) connections will reach 1.3 billion by 2022 -- that's a 220 percent increase from an estimated 400 million in 2017.

The new research found that emerging cellular networks -- including NB-IoT, LTE-M and 5G -- will grow together to account for just under 10 percent of all cellular M2M connections by 2022.

Mobile network operators are now racing to provide the underlying connectivity for the future high growth of the anticipated M2M connections, spurred on by the emerging use cases.


The research forecasts that the following market sectors will witness the highest growth rates, in terms of cellular M2M connections over the next 4 years:

  • Smart Cities (66 percent CAGR)
  • Agriculture (37 percent CAGR)
  • Smart Meters (34 percent CAGR)

The market study also found that smart city development will benefit from Low Power Wide Area (LPWA) access technologies. It's estimated that over 25 percent of cellular smart city devices and associated applications will operate over 5G networks by 2022.

The low-cost per connection of LPWA networks and a battery life of 10 years will become appealing for monitoring city operations, including public transportation and public energy infrastructure.

Juniper Research believes that 5G technology will be essential in handling the increasing data traffic generated from smart city devices. They've discovered that services such as traffic information and citizen gateways will generate over 160 Petabytes of data traffic per year in 2022.

Outlook for 5G M2M Applications

In response to this increase in cellular traffic, the Juniper assessment suggests that transforming wireless network architecture would become key to delivering the level of smart city services that have come to be expected by the various stakeholders.

"Edge computing will provide the necessary network capabilities for the provision of services. Decentralizing network functions, by moving them to the edge, will facilitate the ultra-low latency and faster processing power needed," said Sam Barker, senior analyst at Juniper Research.

Monday, February 05, 2018

Enterprise Data Optimization and Analysis Apps Growth

More senior business leaders are recognizing the value of their core data assets. Enterprise data applications are now driving a broad cross-section of business technology investment and associated high-profile digital transformation projects.

According to the latest worldwide market study by 451 Research, enterprise IT leaders are embracing a new model of off-premises, service-oriented IT solutions and will be harnessing data in new ways to differentiate themselves in 2018.

Enterprise Data Apps Market Development

451 Research finds that an IT organization's ability to exploit digital transformation is uneven, with over 60 percent of organizations having no formal transformation strategy in place and many admitting they face challenges in achieving optimal business-IT alignment.

Sixty percent of those organization surveyed say they will run the majority of their IT outside the confines of enterprise data centers by the end of 2019, primarily utilizing off-premises service provider environments such as public cloud infrastructure and associated software-as-a-service (SaaS) offerings.

Accordingly, the largest spending increase in 2018 is for IT delivered as-a-service, at the expense of the traditional on-premises model. 451 Research finds information security is also high on the CIO and CTO strategic agenda, with 16 percent of organizations saying that area of IT investment is getting the largest budget increase.


According to the 451 Research assessment, some cloud providers are emerging as strategic technology suppliers; 35 percent of organizations say Microsoft will be their most strategic partner by the end of 2019, compared to 33 percent today, while 17 percent say AWS will hold that position two years from now compared to 7 percent today.

The survey also highlights a revolution in how organizations will harness data to differentiate themselves and create new commercial value. The top three IT initiatives for 2018 were all data-centric -- 45 percent of respondents pointed to business intelligence, 29 percent mentioned machine learning (ML) or artificial intelligence (AI), while 28 percent said big data analytics.

The growth opportunity around data is clear with almost 30 percent of enterprise organizations saying ML and AI is a top priority in 2018, while just 12 percent of respondents use these solutions today.

Outlook for Data Optimization and Analysis

Meanwhile, usage of much-hyped technologies such as blockchain remains very low, but more organizations will begin to move from proof-of-concept pilots to actual deployment over the next year, with 12 percent of survey respondents citing blockchain as a top IT priority for 2018.

“The survey suggests that many -- but certainly not all -- organizations are finally reaching the point where they can focus on endeavors that help differentiate the business, instead of merely keeping the lights on. In 2018, we expect to see much of this effort focused around a new set of approaches to data optimization and analysis,” said Melanie Posey, vice president at 451 Research.

Friday, February 02, 2018

Digital Transformation is Advancing Hybrid Multi-Cloud

If you're a CTO or CIO that has escalated your organization's move to the cloud, then clearly you're not alone. Worldwide spending on public cloud services and infrastructure is forecast to reach $160 billion in 2018 -- that's an increase of 23.2 percent over 2017, according to the latest market study by International Data Corporation (IDC).

Although annual spending growth is expected to slow somewhat over the 2016-2021 forecast period, the market is forecast to achieve a five-year compound annual growth rate (CAGR) of 21.9 percent with public cloud services spending totaling $277 billion in 2021.

Public Cloud Services Market Development

The industries that are forecast to spend the most on public cloud services in 2018 are discrete manufacturing ($19.7 billion), professional services ($18.1 billion), and banking ($16.7 billion). The process manufacturing and retail industries are also expected to spend more than $10 billion each on public cloud services in 2018.

These five industries will remain at the top in 2021 due to their continued investment in public cloud solutions. The industries that will see the fastest spending growth over the five-year forecast period are professional services (24.4 percent CAGR), telecommunications (23.3 percent CAGR), and banking (23 percent CAGR).

Software as a Service (SaaS) will be the largest cloud computing category, capturing nearly two thirds of all public cloud spending in 2018. SaaS spending, which is comprised of applications and system infrastructure software (SIS), will be dominated by applications purchases, which will make up more than half of all public cloud services spending through 2019.

Enterprise resource management (ERM) applications and customer relationship management (CRM) applications will see the most spending in 2018, followed by collaborative applications and content applications.

Infrastructure as a Service (IaaS) will be the second largest category of public cloud spending in 2018, followed by Platform as a Service (PaaS). IaaS spending will be fairly balanced throughout the forecast with server spending trending slightly ahead of storage spending.

PaaS spending will be led by data management software, which will see the fastest spending growth (38.1 percent CAGR) over the forecast period. Application platforms, integration and orchestration middleware, and data access, analysis and delivery applications will also see healthy spending levels in 2018 and beyond.

The United States will be the largest country market for public cloud services in 2018 with its $97 billion accounting for more than 60 percent of worldwide spending. The United Kingdom and Germany will lead public cloud spending in Western Europe at $7.9 billion and $7.4 billion respectively, while Japan and China will round out the top 5 countries in 2018 with spending of $5.8 billion and $5.4 billion, respectively.

China will experience the fastest growth in public cloud services spending over the five-year forecast period (43.2 percent CAGR), enabling it to leap ahead of the UK, Germany, and Japan into the number 2 position in 2021. Argentina (39.4 percent CAGR), India (38.9 percent CAGR), and Brazil (37.1 percent CAGR) will also experience particularly strong spending growth.

Outlook for Cloud Adoption by Industry

The U.S. industries that will spend the most on public cloud services in 2018 are discrete manufacturing, professional services, and banking. Together, these three industries will account for roughly one third of all U.S. public cloud services spending this year.

In the UK, the top three industries (banking, retail, and discrete manufacturing) will provide more than 40 percent of all public cloud spending in 2018, while discrete manufacturing, professional services, and process manufacturing will account for more than 40 percent of public cloud spending in Germany.

In Japan, the professional services, discrete manufacturing, and process manufacturing industries will deliver more than 43 percent of all public cloud services. The professional services, discrete manufacturing, and banking industries will represent more than 40 percent of China's public cloud services spending in 2018.

"Digital transformation is driving multi-cloud and hybrid environments for enterprises to create a more agile and cost-effective IT environment in the Asia-Pacific region," said Ashutosh Bisht, research manager at IDC. "Even heavily regulated industries are using SaaS for non-core functionality, platform as a service (PaaS) for app development and testing, and IaaS for workload trial runs and testing for their new service offerings."

Tuesday, January 30, 2018

IT Infrastructure Trends Favor Hybrid Multi-Cloud

Hybrid IT deployments continue to gain favor with CIOs and CTOs, but cloud computing will now drive a greater share of the ongoing investment in business technology. Those combined platforms are enabling digital transformation projects across the globe.

Total spending on IT infrastructure products for deployment in cloud environments reached a total of $46.5 billion in 2017, with year-over-year growth of 20.9 percent, according to the latest worldwide market study by International Data Corporation (IDC).

Cloud Infrastructure Market Development

Public cloud data centers will account for 65.3 percent of this spending, growing at the annual rate of 26.2 percent over the IDC forecast period.

Hosted off-premises private cloud environments will represent 13 percent of cloud IT infrastructure spending, growing at 12.7 percent year-over-year. On-premises private clouds will account for 62.6 percent of spending on private cloud IT infrastructure, and will grow 11.5 percent year-over-year in 2017.

Worldwide spending on traditional -- i.e. non-cloud -- IT infrastructure is expected to decline by 2.6 percent in 2017, but will still account for 57.2 percent of total spending on IT infrastructure products -- that's down slightly from 62.4 percent in 2016.


This trend represents a faster share loss than in the previous three years, according to the IDC assessment. Moreover, the growing share of cloud environments in overall spending on IT infrastructure is common across all regions.

In cloud IT environments, spending in all three technology segments is forecast to grow by double-digits in 2017. Ethernet switches and compute platforms will be the fastest growing at 22.2 percent and 22.1 percent, respectively.

Meanwhile, spending on storage platforms will grow 19.2 percent. Investments in all three technologies will increase across all cloud deployment models – public cloud, private cloud off-premises, and private cloud on-premises.

Outlook for Cloud Infrastructure Investment

Long-term, IDC expects spending on off-premises cloud IT infrastructure will grow at a five-year compound annual growth rate (CAGR) of 12 percent, reaching $51.9 billion in 2021. Public cloud data centers will account for 82.1 percent of this amount growing at a 12.1 percent CAGR while spending on off-premises private cloud infrastructure will increase at a CAGR of 11.7 percent.

Combined with on-premises private cloud, overall spending on cloud IT infrastructure will grow at an 11.7 percent CAGR and by 2020 will surpass spending on non-cloud IT infrastructure. Spending on on-premises private cloud IT infrastructure will grow at a 10.8 percent CAGR, while spending on non-cloud IT (on-premises and off-premises combined) will decline at a 2.7 percent CAGR during the same period.

"As adoption of public cloud services and private cloud deployments continue to spread around the world replacing traditional on-premises hardware-centric IT settings, overall market spending on servers, storage, and networking will follow this move," said Natalya Yezhkova, research director at IDC. "The industry is getting closer to the point when cloud deployments will account for the majority of spending on IT infrastructure, which will be a major milestone embracing the benefits of service-centric IT."