Hybrid Cloud Should Benefit You, Not Bezos
We have always been convinced, and remain so, that there is no way that the largest organizations in the world will move their computing to one of the big cloud builders. And ten years ago, when Amazon Web Services was still relatively small and yet growing fast enough to scare the heck out of those who sell IT infrastructure or make its components, the current chief executive officer of Amazon and the former head of its cloud division was fond of saying that “in the fullness of time” all workloads would move to the cloud.
One of the earliest references we can find for this statement is here, and we remember being at the November 2016 re:Invent conference – a press conference after the keynote, to be precise – and sitting right in front of Jassy in the front row and saying that, while that was an interesting statement, there was no way in hell this was going to happen. (We may have used more colorful language than that.) But that has been the party line from AWS since that time, until Jassy came on the call with Wall Street last week to go over the company’s overall financial results for the fourth quarter.
We quoted Jassy in full about the benefits of elasticity and how the AWS business was doing in our coverage of the year end AWS results, and we noticed a shift in attitude as well as a statistic that we do not believe to be true here in 2023. So we will cite that part again:
“I think it’s also useful to remember that 90 percent to 95 percent of the global IT spend remains on-premises,” said Jassy. “And if you believe that – that equation is going to shift and flip, I don’t think on-premises will ever go away – but I really do believe in the next ten to fifteen years that most of it will be in the cloud if we continue to have the best customer experience.”
So now Jassy believes that on premises IT infrastructure will not go away. Which seems more reasonable given data sovereignty issues, latency issues, cost issues, and just the desire by companies to control their own fates. Ya know, like the hyperscalers and cloud builders do. It’s funny how those who want you to give up your infrastructure and your code are the ones who never will. Do as I say, not as I do, we guess.
We don’t think cloud has peaked, and we definitely think that cloud has tremendous – dare we use this word? – utility. But we wonder about that cloud versus on premises percentage of datacenter compute, storage, networking, and software.
As we have said before, we think there are three different models that are evolving and we will see where the chips fall:
The situation is very far from “cloud versus on premises.” It is more complicated than that. But just for fun, let us try to reckon how much of the global IT budget is actually being spent on cloud. We will have to mix and match some datasets.
According to Gartner, there was around $209 billion in IT spending for datacenter systems – servers, storage, switching, and operating systems for them – in 2022. Spending by hyperscalers (who really as SaaS vendors in a sense) and cloud builders for the gear in their datacenters. But Synergy Research says that in 2022, hyperscalers and cloud builders spent $97 billion on datacenter hardware. This is a cost of production for the hyperscalers and clouds. So the rest of the IT market – enterprises of all sizes, governments, educational institutions, research centers, telecommunications providers, and such – only spent around $112 billion on IT gear. So it looks like the hyperscalers and clouds represent around 46.4 percent of datacenter systems spending, which sounds about right.
On top of this, according to Gartner, there is another $790 billion in enterprise software spending in 2022. So basic IT spending outside of clouds – and not including myriad tech support, systems integration, application management, hosting, and cloud services – is $902 billion.
