Public Cloud VIII: COVID-19 Accelerating Migration

THE COWEN INSIGHT

Our 8th annual report on the Public Cloud market based on a survey of 644 company respondents provides insight on a range of topics including:

• cloud spending trends
• workload migration dynamics
• vendor positioning

COVID-19 is accelerating SaaS/Cloud migrations; while looming macro weakness could offset strong growth. Survey was positive for AWS & Azure, as well as other leading platforms.

Public Cloud Spending in ’20 Accelerating for the 2nd Year in a Row

Survey respondents expect their spend with Public Cloud providers to grow 38% year over year (on average) in ’20, accelerating vs. the 36% year over year growth in the ’19 survey and 31% year over year in ’18. We view the results as a positive indicator and directionally accurate, although we acknowledge the many moving parts this year. This includes a surge in demand due to the pandemic, as well as potential macro headwinds in 2H20 that could affect firms’ near-term IT budgets.

COVID-19 Is Accelerating SaaS/Cloud Migration, While Recession Is Potential Offset

COVID-19 is accelerating migration to SaaS/Cloud for >50% of respondents. Respondents cited flexibility, resiliency, and remote work as reasons for the shift. Moreover, a majority expect COVID-19 to affect long-term IT strategy as they lean on resources that are better prepared for pandemics and catastrophic events, including collaboration tools and business continuity.

Meanwhile the looming recession could act as an offset. 3/4 of respondents expect an impact to their firm’s IT spend as they change priorities and look for flexibility amid a cloudy macro outlook. Survey respondents also told us that they may seek temporarily lowered Cloud costs from their provider as a means to maintain / keep their business during a recession.

Multi-Cloud Is Here, Opening Opportunities For Channel Partners

Our survey data underscores the burgeoning multi-cloud environment. >50% of respondents use multiple providers. Meanwhile, 40% of respondents expect to add another Cloud provider. 20% will replace their existing provider. We also see opportunity for third-party partners, given that the top four cloud providers only contact around 20-30% of sales prospects. Of note, security, optimizing performance, and migrating workloads are the top areas where firms seek help from third parties.

Cloud & SaaS Migrations Expected To Continue, With Rapid Growth In Public Cloud

On-Premise infrastructure usage continues to decline vs. last year’s survey. Private Cloud is the biggest beneficiary over the next 5 years, followed by Public Cloud and SaaS. Financial and CRM applications are the top workloads leading the migration to Private Cloud. SaaS also continues to expand, with nearly half of firms considering switching a non-SaaS workload to SaaS. Meanwhile, >1/3 of respondents expect Public Cloud spend growth to accelerate vs. 2019, with 38% year over year expected growth in ‘20.