Forbes

Cloud Is Now A Money Machine For Two Out Of Five Companies

By Joe McKendrick

December 29, 2016

Since cloud computing became a “thing” five years ago or so, it has been seen in operational terms – a way to cut costs, avoid up-front capital expenditures on IT systems and equipment, and a way to improve interactions with customers and between employees.

Now, it appears that cloud is becoming a money machine for many businesses as well. A surprise finding from a recent survey is that 80% of companies are now drawing some of their revenues from the cloud, and 42% indicate that this is now the source of a majority of their revenues. 

Let that sink in. Companies are figuring out ways to leverage cloud-based services to amp up their income streams, versus simply shaving costs. A sizeable segment now depends on cloud for most of it. We already know that many startups exist solely on the cloud, and this is now becoming the growth engine for established concerns as well.

This is the key revelation from the survey of 1,351 executives, which confirms that many organizations are figuring out how to monetize their cloud engagements, above and beyond well-documented efficiency gains. The study is the latest in an annual series published by North Bridge, a growth equity and venture capital firm, in partnership with research analyst firm Wikibon.

While the online slides provided by North Bridge do not spell out how this monetization is actually occurring, it can be surmised that much of the cloud-based revenues are coming via cloud-enabled e-commerce applications, and perhaps some elements through cloud-based supply chains, data analytics, and new digital product creation. Seventy-five percent report sales and marketing is now enabled through cloud.

While it’s also unclear how much revenue cloud is actually generating for companies at this point, it’s abundantly clear that money is flowing into cloud services at a torrid pace. An earlier piece of research by Wikibon estimated that public cloud spending is expected to accelerate rapidly, growing from $75 billion in 2015 to $522 billion by 2026 at a compound annual growth rate of 19%. Within each public cloud segment continued rapid growth rates are also expected for Software as a Service (19% annual growth), Platform as a Service (33%), and Infrastructure as a Service (18%). Wikibon estimates that by 2026, cloud will account for nearly 50% of spending related to enterprise hardware, software, and outsourcing services.

The current North Bridge study reveals nearly half of respondents indicated they are using or will use, within the next 24 months, an industry cloud offering. Important areas of investment include analytics, with 58% mentioning this as a new top priority, along with 52% citing containers and 48% investing in IoT. An emerging area, virtual reality, also gets the nod from 16% of executives as a cloud investment priority.

The survey, conducted in collaboration with 53 cloud companies, finds that a hybrid model is still the predominant strategy at 47% followed by public with 30%, and private with 23%. These figures have remained roughly constant from last year, the survey’s authors state.

SaaS leads in terms of adoption, used by seven in 10 companies. IaaS isn’t far behind, with 58% of respondents deploying IaaS for compute and 53% for storage. Both areas are expected to increase a modest five percent over the next two years. The rising star of the moment is PaaS, which is being deployed by 45%, but is expected to show the highest increase over the next two years, growing by 19% annually.

The survey finds while slightly less than 50% of all companies either have a cloud first or cloud only strategy; some form of cloud strategy is pervasive among all with 90% of companies surveyed reporting that they use it in some way.

It also appears fears about data security and vendor lock-in are also abating. At this point, 28% of companies say they store 50% or more of their data in a public cloud. Another 59% of companies surveyed store 50% or more of their data in a private cloud. Public cloud data storage is expected to increase by 18%, and private cloud data storage expected to decrease 16%.

 

This article was written by Joe McKendrick from Forbes and was legally licensed through the NewsCred publisher network.