90% of of native cloud IaaS providers will be forced out of the market by 2019.
The shrinking data centre outsourcing market (DCO), alongside the massive growth in cloud and industrialised services, is pointing towards a massive shift toward hybrid infrastructure. This shift is set to see equal spend on cloud, hosting and traditional infrastructure services by 2020.
According to Gartner, the worldwide DCO market is set to see spending decline from $55.1 billion in 2016 to $45.2 billion in 2020. Cloud compute services, on the other hand, are expected to grow from $23.3 billion in 2016 to reach $68.4 billion in 2020. Spending on colocation and hosting is also expected to increase, from $53.9 billion in 2016 to $74.5 billion in 2020.
“As the demand for agility and flexibility grows, organizations will shift toward more industrialized, less-tailored options,” said DD Mishra, research director at Gartner.
“Organisations that adopt hybrid infrastructure will optimise costs and increase efficiency. However, it increases the complexity of selecting the right toolset to deliver end-to-end services in a multisourced environment.”
In 2016, traditional worldwide DCO and IUS together represented 49 per cent of the $154 billion total data centre services market worldwide. This is expected to tilt further toward cloud IaaS and hosting, and by 2020, DCO/IUS will be approximately 35 per cent of the expected $228 billion worldwide data centre services market.
“This means that by 2020 traditional services will coexist with a minority share alongside the industrialised and digitalised services,” said Mr Mishra.
Gartner also predicts that through 2020, data centre and relevant as a service (aaS) pricing will continue to decline by at least 10 per cent per year.
From 2008 through 2016, Gartner pricing analysis of data centre service offerings shows prices have dropped yearly by 5 per cent to 7 per cent for large deals and by 9 per cent to 12 per cent for smaller deals.
More recently — from 2012 to the present — prices for the new aaS offerings, including IaaS and storage as a service, have dropped in similar to higher ranges.
“The figures from Gartner highlight the continued shift towards hybrid infrastructure services as more and more organisations look to blend on-premise and cloud-based services. Many businesses’ existing infrastructures are currently designed for ‘business as usual’ operations – with a combination of dated licensing models not designed for cloud and a lack of application compatibility,” said Maarten van Montfoort, Vice President Northwest Europe at COMPAREX.
“Ultimately, there is no one-size-fits all model, and each organisation’s journey will be different. For example, can legacy, business-critical applications – not built with cloud in mind – be re-architected for the cloud, or do they need to stay on premise? Or should the organisation be seeking out a new SaaS product to fit their needs? And does the organisation have the specific skills in-house that it will need to do this? These are all important considerations if organisations are to maximise the ROI of hybrid cloud.”
Gartner has also forecast that 90 per cent of native cloud IaaS providers will be forced out of this market by the Amazon Web Services (AWS)-Microsoft duopoly by 2019.
Gartner says that Microsoft and AWS have pricing, innovation and compute power that other providers simply cannot match.
According to Gartner, it is only in new markets that the dominance of AWS and Microsoft will be challenged by businesses such as Aliyun, the cloud service arm of Alibaba, the top player in China.
“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,” said David Groombridge, research director at Gartner.
“Lack of substantial competition for two key providers could lead to an uncompetitive market. This could see organisations locked into one platform by dependence on proprietary capabilities and potentially exposed to substantial price increases.”