9th Annual Public Cloud Survey

John Blackledge, Internet Analyst and J. Derrick Wood, CFA, Enterprise Software Analyst discuss their recent Ahead of the Curve Series® Report, Public Cloud IX: Cloud Migration Continues Apace. They share results from their public cloud survey with IT professionals responsible for decisions on IT purchases throughout the US, UK, Germany, France, and Italy. Press play to watch the video.

THE COWEN INSIGHT

Our 9th annual report on the Public Cloud market, based on a survey of 654 US and 800+ European respondents, provides insight into a range of topics including Cloud spending trends, workload migration dynamics, and vendor positioning. COVID-19 has accelerated SaaS/Cloud migrations, with much of the impact likely permanent.

US Public Cloud Spending in ’21 Accelerating for the 3rd Year in a Row

Global Public Cloud market revenue of $322BN in ’21 is expected to rise to $661BN in ’26, a ~20% CAGR per Gartner. Meanwhile, Infrastructure as a Service (IaaS) is the fastest growing segment at a 29% CAGR ’21-’26.

US survey respondents expect spend with Public Cloud providers to grow 39% y/y (on average) in ’21, accelerating vs. the 38% y/y growth in ’20 and 36% y/y in ’19.

We extended our Public Cloud work to Europe for the first time this year. Europe respondents expect 32% growth in Cloud spend. This is still robust, but slightly trailing US expectations.

COVID-19 Has Increased SaaS / Cloud Usage More Than Expected; Much of the Impact Is Likely to Be Permanent

The ongoing pandemic has led to a direct increase in all types of cloud usage. 60% of respondents stated that COVID has affected IT spend. Meanwhile, ~45% of respondents have increased Software-as-a-Service (SaaS), Private, and Public Cloud usage. ~75% of respondents are accelerating migration to Cloud/SaaS due to COVID.

Resiliency & availability are the top drivers for increasing SaaS usage. Flexibility is a driver for Private & Public Cloud. Respondents who increased SaaS, Private, and Public Cloud spend expect ~40% of the higher spend will be permanent.

Multi-Cloud Is Growing

Our survey data increasingly reflects a multi-cloud environment. 63% of US respondents use multiple providers vs. 53% in ’20. We also see opportunity for third party partners, given that the top 4 cloud providers contact less than 40% of sales prospects. Per our survey, around 19% of firms have not been contacted at all. At the same time, major providers continue to disintermediate these same third parties, given that cloud providers increased direct support by around 5% vs. last year. Of note, security, optimizing performance, and migrating workloads remain the top areas where firms seek help from third parties.

Europe Cloud Trends Are Similar to US

Our inaugural survey of European IT spending reflects a broad shift toward Cloud that is in many ways similar to US trends. This includes infrastructure allocation, which is close to US percentages across all major types of infrastructures.

In addition, Public Cloud sees 2% lower workload usage in Europe, while Private Cloud is 2% higher. On-premise usage is identical, although expected to decline slightly faster vs US over the next 5 years.

Risks to Public Cloud Spending Growth

While respondents were bullish on Public Cloud spending growth, there are some risks to spend trajectory:

1. SaaS is cannibalizing some IaaS workloads, with database, back office apps, & testing / development viewed as highest risk
2. Our respondents also expect 20% of workloads to never migrate to Cloud (slightly higher vs. 19% last year)
3. Security and pricing concerns are chief reasons for migrating away from Public Cloud. European respondents are somewhat more concerned about security vs. US firms

Video Transcript

I’m John Blackledge, Internet Analyst here at Cowen. And I’m Derrick Wood, Enterprise Software Analyst at Cowen.

We recently published our 9th Annual Public Cloud Ahead of the Curve® Series Report, a collaborative effort with 7 Cowen analysts and consulting firm Altman Solon. We surveyed nearly 650 US IT purchase decision makers and over 800 across the UK, Germany, France, and Italy.

There’s an incredible amount of depth to the work. Here are some key highlights:

• Cloud and SaaS migrations continue at the expense of On Premise in both the US and Europe, with file systems and eCommerce seeing the largest drop in on prem support.

• 63% of US companies use 2 or more Cloud providers. That’s up from 53% last year. In Europe, 57% of companies use multiple cloud vendors.

• Respondents expect the COVID impact will be long-term and permanent with higher expected usage and spend on Cloud solutions.

• And respondents expect Public Cloud spend to grow 39% year over year in the US vs. 32% year over year in growth Europe.

Our survey work implies that growth in US cloud spending will slightly accelerate in 2021 vs. 2020, a directional trend that bodes well for all the vendors in the cloud infrastructure space. The workloads that are highest in priority to move from on-premise to cloud over the next 2 years include eCommerce, databases, and analytics. While the lowest priority workloads are disaster recovery, e-mail, and back-office apps. We’re also seeing growing awareness around Edge Computing, with IoT, industrial IoT, and smart applications seeing the highest areas of investment.

We hope you enjoy the report. Let us know what you think.