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Cloud Shift: Total Enterprise IT Market Disruption

Much has been written about the ongoing rise of public cloud computing across the globe, as more senior business leaders choose to deemphasize investment in on-premises IT infrastructure within traditional data centers. How did this happen, and what did enterprise CIOs and CTOs learn from this transition?

Well, this transition was inevitable. Legacy IT organizations could have focused more on the Line of Business leader's desired business outcomes that investment makes possible, rather than the technical features and functions of IT solutions. Of course, the same could be said for legacy IT vendors.

Some learned, the hard way, that terms like "Shadow IT" and "Rogue Users" were the wrong way to refer to and respond to the initial adoption of unsanctioned Software-as-a-Service (SaaS) offerings. They also learned that upskilling IT staff to speak the language of business is now mandatory.

 So, here we are at this point in time. What happens next is predictable (e.g. Cloud Shift forecast).

Enterprise Cloud Computing Market Development

Enterprise IT spending on public cloud computing, within addressable market segments, will overtake spending on traditional IT in 2025, according to the latest worldwide market study by Gartner.

Note, Gartner's "Cloud Shift" research includes only those enterprise IT categories that can transition to the cloud, within the application software, infrastructure software, business process services, and system infrastructure markets.

By 2025, 51 percent of IT spending in these four categories will have shifted from traditional solutions to the public cloud -- that's compared to 41 percent in 2022. Almost two-thirds (65.9 percent) of spending on application software will be directed toward cloud technologies in 2025 -- that's up from 57.7 percent in 2022.

"The shift to the cloud has only accelerated over the past two years due to COVID-19, as organizations responded to a new business and social dynamic," said Michael Warrilow, research vice president at Gartner. "Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets."

In 2022, traditional IT offerings will constitute 58.7 percent of the addressable revenue, but growth in traditional markets will be much lower than in cloud computing markets.

Demand for integration capabilities, agile work processes, and composable architecture will drive a continued shift to the cloud, as long-term digital transformation and modernization initiatives are brought forward to 2022.

According to the Gartner assessment, technology product managers should use the cloud shift as a measure of market opportunity.

In 2022, more than $1.3 trillion in enterprise IT spending is at stake from the shift to cloud, growing to almost $1.8 trillion in 2025, according to Gartner.

Ongoing disruption to IT markets by cloud computing will be amplified by the introduction of new technologies, including Distributed Cloud. Many will further blur the lines between traditional IT and cloud service offerings.

Enterprise adoption of distributed cloud has the potential to further accelerate cloud shift because it brings public cloud services into domains that have primarily been non-cloud, expanding the addressable market.

Gartner analysts believe that organizations are evaluating it because of its ability to meet location-specific requirements, such as data sovereignty, low latency, and network bandwidth.

Outlook for Enterprise Cloud Computing Applications 

To capitalize on the shift to cloud, Gartner recommends information technology services providers target segments where the shift is occurring most aggressively, in addition to seeking new high-growth enterprise cloud opportunities.

For example, infrastructure-related segments have a lower level of cloud penetration and are expected to grow faster than segments such as enterprise applications that are already highly penetrated. IT vendors should also target specific personas, adoption profiles, and use cases with savvy go-to-market initiatives.

That said, I believe the traditional IT vendor that has thus far resisted a more balanced -- business + technical buyer -- go-to-market methodology will continue to struggle in their transition from selling a capital investment in legacy IT infrastructure and software licenses towards a modern cloud-based SaaS subscription model.

Balance is also important in the typical IT vendor's evolution towards gaining an understanding and associated skills in forward-looking Business Buyer Enablement, which should now become a priority over their legacy IT Sales Enablement. My point: learning how to achieve business outcomes from digital transformation are the paramount talent criterion for successful buyers and sellers.

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