Massive Shift to Hybrid IT Services Is Underway
Research by Gartner shows industrialized services and the continuing growth of the cloud, coupled with a drop in traditional data center outsourcing, or DCO, indicate a large shift from traditional data store to hybrid infrastructure paradigms. In their report, analysts at Gartner predict fierce competition in spending between traditional, hosting, and cloud infrastructure by 2020. That same year, according to Gartner’s predictions, hybrid infrastructure will be in use by 90 percent of organizations.
Traditional DCO spending was estimated at $55.1 billion in 2016, and Gartner predicts it to drop to $45.2 billion in 2020. Colocation and hosting, on the other hand, is projected to rise to $74.5 billion in 2020, up from just $53.9 billion in 2016. Cloud computing services will rise from $23.3 to $68.4 billion. Infrastructure utility service, or IUS, spending will see growth from $21.3 billion to $37 billion in this time period, and storage as a service spending, which was approximately $1.7bn in 2016, is projected to rise to $2.7 billion by 2020.
Combined, DCO and IUS are expected to account for 35 percent of the $228 billion spent globally on the data center services market; this represents a drop from the 49 percent of the market DCO and IUS held in 2016, when the total amount spent for all services was $154 million. These numbers are largely based on a Gartner-conducted survey of 303 DCO reference customers across the globe in 2016. Twenty percent of those surveyed already use hybrid infrastructure services for their data, and a further 20 percent expect to make change to hybrid services over the next 12 months.
Relevant infrastructure as a service and data center pricing is expected to drop by approximately 10 percent per year by 2020. Gartner studies have shown that, between 2008 and 2016, prices dropped by an average of five to seven percent per year for large deals. Pricing for smaller deals in this time period dropped by an even larger amount, between nine and 12 percent per year.
Price pressures are likely to cause some traditional DCO vendors to exit the DCO market in the coming years. Others are likely to adjust to the new market to remain viable. Because more vendors are expected to enter the market and provide new services, buyers will have many more options to choose from, say Garner.
Conversely, competition is expected to decrease in the native cloud IaaS space, with Amazon Web Services and Microsoft Azure controlling 90 percent of the market by 2020. Both Microsoft and Amazon saw large gains in 2016, and their competitors largely dropped in terms of features and market share. New service and pricing schemes make the two dominant players more appealing, and their overall computing capabilities and innovation help separate them from the competition. In new markets, however, Gartner predicts potential challenges to Amazon and Microsoft. Alibaba, for example, has launched a cloud service called Aliyun, and Alibaba’s influence in China could make them a force to be reckoned with.
“The competition between AWS and Azure in the IaaS market will benefit sourcing executives in the short to medium term but may be of concern in the longer term,” says David Groombridge, research director at Gartner. “Lack of substantial competition for two key providers could lead to an uncompetitive market. This could see organizations locked into one platform by dependence on proprietary capabilities and potentially exposed to substantial price increases.”
Gartner clients can read the report: “Predicts 2017: Infrastructure Services Become Hybrid Infrastructure Services.” and Gartner will be covering these trends at their Gartner IT Infrastructure, Operations & Data Center Summits 2017 in Sao Paulo, Brazil, Mexico City, Mumbai, India, Sydney, Australia, and at the Gartner Data Center, Infrastructure and Operations Management Summit in London and Las Vegas.