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Why cloud spending is on the rise

Industry analysts warned of a potentially concerning “cloud slowdown” last year. This came as a result of enterprises cutting spending on cloud services due to tightening budgets and increased economic uncertainty. However, that’s projected to change in 2024.

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Originally published by Datacenter Dynamics

Industry analysts warned of a potentially concerning “cloud slowdown” last year. This came as a result of enterprises cutting spending on cloud services due to tightening budgets and increased economic uncertainty. However, that’s projected to change in 2024.

While budgets remain tight, global cloud spending is expected to increase by 20 percent this year, according to new Canalys research. In addition, TechTarget and ESG Technology Spending Intentions research revealed the increasing importance of managed cloud service providers, particularly for industries driving cloud growth.

Let’s look at some of the reasons why, despite last year’s pessimistic prognoses and the volatile global economy, cloud spending is expected to hit new records this year.

The rise of hybrid, multi and private cloud solutions

Companies are discovering that the evolving business landscape demands a more agile approach to cloud hosting. Despite the initial allure of public cloud services from hyperscalers, research from an IDC survey indicates their popularity is fading. While public cloud solutions served as a good starting point for digital transformations, the limitations and risks associated with these platforms have prompted the rise of alternatives.

With the rise of complex technologies such as AI and Edge computing, growing cybersecurity concerns, and the ever-present need for cost-effective IT solutions (both in good times and bad), businesses are increasingly turning to diversified and tailored cloud strategies. As the public cloud cannot support all these functions alone, so companies are diversifying their cloud presence by adopting private, hybrid, and multi-cloud architectures.

As more companies become aware of bespoke hybrid or private cloud platforms and how they can help to meet business needs, increased and proactive cloud investment is becoming the way to prepare businesses for growth and protect against challenging economic conditions.

In other words, companies are embracing the long-term benefits of the cloud.

However, the flip side is that it can be difficult to manage the increased complexity of a bespoke cloud environment, especially if there’s a shortage of cloud talent.

Growing demand for MSPs

Due to the talent shortage and increasing complexities in the management of emerging cloud platforms, managed service providers (MSPs) are becoming increasingly essential. Many organizations are expanding beyond their in-house IT teams with MSPs or simply foregoing their in-house team altogether, letting the business focus on its goals. At the same time, the MSP handles the cloud environment.

Security is also a significant element. According to a Checkpoint survey, 24 percent of respondents reported experiencing public cloud-related security incidents, with misconfigurations, account compromises, and exploited vulnerabilities being the most common incident types. Therefore, companies also need assistance navigating the increasing complexity of cybersecurity. They seek partners who can bolster their ability to detect and respond effectively to threats.

The need for MSPs’ knowledge and skills is particularly acute in some vertical industries that require time and expertise to reach technological maturity. Many companies in those sectors use MSPs to lead their cloud integration and manage cybersecurity.

Cloud growth in vertical industries

Research from Tech Target has identified some of the vertical markets set to be growing IT budgets the most this year, with finance, manufacturing, technology, and education leading the way. Here are some examples of how cloud technology is driving growth in these industries:

Finance:

  • Cloud technologies enable financial institutions to streamline processes, improve data analytics for risk management, and offer personalized services to customers.
  • Adoption of cloud-based solutions in finance facilitates scalability, agility, and cost-effectiveness, allowing firms to adapt quickly to market changes and regulatory requirements.

Manufacturing:

  • Cloud technologies support Industry 4.0 initiatives by optimizing production processes, enabling real-time data analytics, and fostering innovation in smart manufacturing.
  • Manufacturers leverage cloud solutions to enhance efficiency, agility, and competitiveness by integrating IoT devices, AI applications, and automation into their operations.

Technology:

  • Cloud computing enables tech companies to dynamically scale resources, reduce time to market, and innovate rapidly in response to market demands.
  • Tech firms use cloud platforms for data storage, processing power, and AI capabilities to drive digital transformation and deliver cutting-edge solutions to customers.

Education:

  • Cloud services are transforming the education sector by facilitating remote learning, collaboration among students and educators, and access to educational resources.
  • Educational institutions use cloud technologies for virtual classrooms, online learning platforms, and data management systems to enhance teaching effectiveness and student engagement.

Key takeaways

Today’s world of economic volatility and geopolitical uncertainty, as well as the accelerated adoption of new technologies, is the driving force behind this year’s predicted increase in cloud investment. Many organizations now recognize that the cloud is the key to long-term competitiveness and that bespoke cloud solutions, including private, hybrid, and multi-cloud, are the route to business agility, adaptability and resilience.

Previously concerned about the challenges of managing bespoke but complex cloud environments, enterprises appear to be convinced of the benefits and are increasingly collaborating with experts from managed service providers.

MPSs are set to become an essential element of the cloud technology sector, evolving and driving cloud spending and attracting investments, particularly in industries such as finance, manufacturing, technology, and education.

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