Research Report. Abstract: 2013 Public Cloud Computing Trends. March 2013

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1 Research Report Abstract: 2013 Public Cloud Computing Trends By Wayne Pauley, Senior Analyst and Bill Lundell, Senior Research Analyst With Jenn Gahm, Senior Project Manager March 2013

2 Introduction Research Objectives Research Report: 2013 Public Cloud Computing Trends In order to assess IT spending priorities over the next months, ESG recently surveyed 540 IT professionals representing midmarket (100 to 999 employees) and enterprise-class (1,000 employees or more) organizations in North America and Western Europe. All respondents were personally responsible for or familiar with their organizations 2012 IT spending as well as their 2013 IT budget and spending plans at either an entire-organization level or at a business-unit/division/branch level. A subset of ESG s questions in this survey focused on respondents usage of and plans for public cloud computing services. Specifically, the survey asked the following questions with respect to public cloud computing services: How widespread is cloud computing adoption? How will 2013 spending for cloud computing services change relative to 2012 levels? How does the usage of cloud computing services vary by organization size, IT budget, and other variables? What effect does the age of an organization (i.e., how long it has been in operation) have on cloud computing usage trends? Approximately what percentage of total 2013 IT budgets is earmarked for cloud computing services? Among organizations that do not use public cloud computing services, what are the leading adoption impediments? What if anything is preventing more pervasive usage among those organizations that already leverage these services? What benefits have current cloud computing users realized? What are the usage trends for software-as-a-service (SaaS), and how do they vary by organization size and existing onsite production? What types of applications are being delivered via the SaaS model? What applications will potential SaaS users deploy via the cloud? What percentage of organizations current applications is delivered via a SaaS model? How will this change over time? What are the usage trends for infrastructure-as-a-service (IaaS), and how do they vary by the scope of existing onsite IT infrastructure? What are the most common cloud infrastructure service use cases for current and potential IaaS users? What is the likelihood among current and potential IaaS users of replacing onsite physical application with cloud-based systems going forward? What impact will public cloud computing services have on organizations traditional IT infrastructure and processes over the next five years? Survey participants represented a wide range of industries including manufacturing, financial services, communications and media, retail, government, and business services. For more details, please see the Research Methodology and Respondent Demographics sections of this report.

3 Research Methodology To gather data for this report, ESG conducted a comprehensive online survey of IT professionals from private- and public-sector organizations in North America (United States and Canada) and Western Europe (United Kingdom, France, and Germany) between December 11, 2012 and December 31, To qualify for this survey, respondents were required to be IT managers personally responsible for or familiar with their organizations overall 2013 IT budget and spending plans, either at an entire-organization level or at a business-unit/division/branch level. Respondents who were only responsible for IT spending at a departmental or workgroup level were disqualified. All respondents were provided an incentive to complete the survey in the form of cash awards and/or cash equivalents. After filtering out unqualified respondents, removing duplicate responses, and screening the remaining completed responses (on a number of criteria) for data integrity, we were left with a final total sample of 540 IT managers. Please see the Respondent Demographics section of this report for more information on these respondents. Note: Totals in figures and tables throughout this report may not add up to 100% due to rounding.

4 Respondent Demographics The data presented in this report is based on a survey of 540 qualified respondents. The figures below detail the demographics of the respondent base, including individual respondents current job and budget responsibility, as well as respondent organizations total number of employees, primary industry, annual revenue, 2013 IT budget, number of IT staff, number of data centers, number of production, and geographic region. Respondents by Job Responsibility Respondents current job responsibility is shown in Figure 1. Figure 1. Survey Respondents, by Job Responsibility Which of the following best describes your current responsibility within your organization? (Percent of respondents, N=540) IT staff, 3% IT management, 40% Senior IT management (e.g., CIO, VP of IT, Director of IT, etc.), 57% Respondents by Budget Responsibility Respondents responsibility/familiarity with their organization s IT budgets and spending is shown in Figure 2. Figure 2. Survey Respondents Budget Responsibility/Familiarity Which of the following best describes your personal responsibility with respect to your organization s 2013 IT budget and spending plans? (Percent of respondents, N=540) I am responsible for/familiar with IT budgets and spending plans for a specific business unit, division, branch office, etc., 32% I am responsible for/familiar with IT budgets and spending plans for my entire company/organization, 68%

5 Respondents by Number of Employees The number of employees in respondents organizations is shown in Figure 3. Figure 3. Survey Respondents, by Number of Employees How many total employees does your organization have worldwide? (Percent of respondents, N=540) 20,000 or more, 100 to 249, 11% 10,000 to 19,999, 250 to 499, 13% 5,000 to 9,999, 12% 500 to 999, 1 2,500 to 4,999, 1,000 to 2,499, 12% Respondents by Industry Respondents were asked to identify their organization s primary industry. In total, ESG received completed, qualified respondents from individuals in 19 distinct vertical industries, plus an Other category. Respondents were then grouped into the broader categories shown in Figure 4. Figure 4. Survey Respondents, by Industry What is your organization s primary industry? (Percent of respondents, N=540) Government (Federal), 4% Transportation & Logistics, 4% Government (State & Local), 5% Communications & Media, Business Services (accounting, consulting, legal, etc.), 9% Other, 14% Retail/Wholesale, Health Care, 11% Manufacturing, 21% Financial (banking, securities, insurance), 1

6 Respondents by Annual Revenue Respondent organizations annual revenue is shown in Figure 5. Figure 5. Survey Respondents, by Annual Revenue What is your organization s total annual revenue ($US)? (Percent of respondents) Midmarket (100 to 999 employees, N=214) Enterprise (1,000 or more employees, N=326) 35% 30% 25% 15% 5% 0% 27% 25% 2% 3% Less than $50 $50 to $99 29% 9% $100 to $499 7% 14% $500 to $999 4% 27% $1 billion to $4.999 billion 2% 12% 11% $5 billion to $9.999 billion 0% 0% $10 billion to $ billion 19% $20 billion or more 4% Not applicable (e.g., public sector, nonprofit) Respondents by Total 2013 Overall IT Budget The total expected 2013 spending on IT products, staffing, and services is shown in Figure 6. Figure 6. Survey Respondents, by Total 2013 Budget for All IT Products, Staffing, and Services To the best of your knowledge at this time, what is your organization s total 2013 budget for all IT products, staffing, and services ($US)? (Percent of respondents) Midmarket (100 to 999 employees, N=214) Enterprise (1,000 or more employees, N=326) 60% 50% 51% 40% 30% 0% 9% Less than $1 27% 12% 13% 12% $1 to $4.999 $5 to $ % $10 to $ % 11% $25 to $ % 5% 5% 1% 3% 4% 0% 0% 0% 0% 0% 0% $50 to $ $75 to $ $100 to $249 $250 to $499 $500 to $749 $750 to $999 $1 billion or more

7 Respondents by 2013 IT Budget Allocations 2013 IT budget allocations by category are shown in Figure 7. Figure 7. Survey Respondents, by 2013 IT Budget Allocations 100% 90% 80% 70% 60% To the best of your knowledge at this time, approximately what percentage of your organization s total 2013 IT budget is allocated to each the following categories? (Mean, N=540) Other operational costs, Cloud computing services, IT Outsourcing /Professional Services/Consulting, 8% Telecom/Network Services, 11% Software, 17% 50% 40% Hardware, 30% Staff, 32% 0% Respondents by Number of IT Staff The number of IT staffers in respondents organizations is shown in Figure 8. Figure 8. Survey Respondents, by Number of IT Staff 70% 6 To the best of your knowledge, approximately how many IT staff does your organization employ worldwide? (Percent of respondents) Midmarket (100 to 999 employees, N=211) Enterprise (1,000 or more employees, N=289) 60% 50% 40% 30% 0% Less than 25 18% 18% 9% 11% 11% 13% 13% 9% 8% 3% 2% 0% 1% 0% 0% 25 to to to to to to to 999 1,000 or more

8 Respondents by Number of Data Centers The number of data centers operated worldwide by respondent organizations is shown in Figure 9. Figure 9. Survey Respondents, by Number of Data Centers How many data centers does your organization operate worldwide? (Percent of respondents) Midmarket (100 to 999 employees, N=214) Enterprise (1,000 or more employees, N=326) 50% 45% 43% 40% 35% 30% 25% 15% 7% 24% 24% 1 31% 8% 19% 9% 18% 5% 0% 1 data center 2 data centers 3 to 5 data centers 6 to 10 data centers 1% 0% 11 to 20 data centers More than 20 data centers Respondents by Number of Production Servers The number of production operated worldwide by respondents IT organizations is shown in Figure 10. Figure 10. Survey Respondents, by Number of Production Servers Approximately how many production (whether physical or virtual) are supported worldwide by your IT organization? (Percent of respondents) Midmarket (100 to 999 employees, N=214) Enterprise (1,000 or more employees, N=326) 40% 35% 3 30% 25% 15% 19% 25% 12% 17% 14% 12% 17% 5% 0% 4% 5% Less than to to to to 500 5% 2% 0% 0% 0% 0% 0% 501 to 1,000 1,001 to 2,500 2,501 to 5,000 More than 5,000 Don t know

9 Respondents by Usage of Server Virtualization Technology The usage of server virtualization technology is shown in Figure 11. Figure 11. Survey Respondents, by Usage of Server Virtualization Technology Is your organization currently using server virtualization technology, in which multiple virtual machines can be run on a single physical server? (Percent of respondents, N=540) Don't know, 1% No, 21% Yes, 77% Respondents by Percentage of Virtualized x86 Servers Among current server virtualization users, the approximate percentage of x86 virtualized to date is shown in Figure 12. Figure 12. Survey Respondents, by Percentage of x86 Servers Virtualized 18% 1 14% 12% 8% 4% 2% 0% Of all the potential x86 in your organization that can be virtualized, approximately what percentage of these systems has actually been virtualized to date? (Percent of respondents, N=416) Less than of 13% to of 19% 21% to 30% of 12% 12% 31% to 40% of 41% to 50% of 9% 51% to 60% of 7% 61% to 70% of 8% 71% to 80% of 4% 81% to 90% of 91% to 100% of 1% Don t know

10 Respondents by Length of Organizations Existence (i.e., Age of Organization) The length of time a respondent s employer has been in existence is shown in Figure 13. Figure 13. Survey Respondents, by Length of Organizations Existence (i.e., Age of Organization) For approximately how long has your current employer been in existence? (Percent of respondents, N=540) 1 to 5 years, 5% More than 50 years, 35% 6 to 10 years, 11% 11 to 20 years, 22% 21 to 50 years, 2 Respondents by Region Figure 14 shows the regional breakdown of the respondent base. Figure 14. Survey Respondents, by Region Respondents by region. (Percent of respondents, N=540) Western Europe, 25% North America, 75%

11 Respondents by Psychographics ESG created a company psychographic profile by capturing respondents views on both their organizations purchasing pattern for IT products and services (see Figure 15) and the importance of data (see Figure 16). Figure 15. Survey Respondents, by Purchasing Pattern for IT Products and Services Generally speaking, how would you describe your organization s purchasing patterns for IT products and services? (Percent of respondents, N=540) Laggard consumers we don t really stay on top of technology trends and tend to make investments only after those technologies have been widely accepted in the market, 9% Don t know/no opinion, 2% Leading-edge consumers we stay on top of the most current technology trends and purchase related products as soon as they are available, Average consumers we stay on top of technology trends but generally wait to purchase related products until they have proven acceptance in the market, 69% Figure 16. Survey Respondents, by Perspective on Data Which of the following statements best describes your organization s perspective on data? (Percent of respondents, N=540) Data is our business (our core products and services are information-based), 31% Data helps to support our business (we offer physical products and services), 69%

12 Contents List of Figures... 3 List of Tables... 3 Executive Summary... 5 Report Conclusions... 5 Introduction... 7 Research Objectives... 7 Research Findings... 8 The State of the Public Cloud Computing Market... 8 Software-as-a-Service (SaaS) Usage Trends Infrastructure-as-a-Service (IaaS) Usage Trends Conclusion Research Implications for Technology Vendors and Service Providers Research Implications for IT Professionals Appendix Leading-edge IT Organizations More Likely to Be SaaS and IaaS Users Younger Organizations More Likely to Be SaaS and IaaS Users Research Methodology Respondent Demographics Respondents by Job Responsibility Respondents by Budget Responsibility Respondents by Number of Employees Respondents by Industry Respondents by Annual Revenue Respondents by Total 2013 Overall IT Budget Respondents by 2013 IT Budget Allocations Respondents by Number of IT Staff Respondents by Number of Data Centers Respondents by Number of Production Servers Respondents by Usage of Server Virtualization Technology Respondents by Percentage of Virtualized x86 Servers Respondents by Length of Organizations Existence (i.e., Age of Organization) Respondents by Region Respondents by Psychographics... 38

13 List of Figures Figure 1. Usage Trends for Public Cloud Computing Services, by Company Size... 8 Figure 2. Usage Trends for Public Cloud Computing Services, by IT Purchasing Patterns... 9 Figure 3. Usage Trends for Public Cloud Computing Services, by Age of Organization Figure 4. Usage Trends for Public Cloud Computing Services, by Industry Figure 5. Factors Preventing More Pervasive Usage or Initial Adoption of Public Cloud Computing Services Figure 6. Benefits Derived from the Usage of Public Cloud Computing Services Figure 7. Change in 2013 Cloud Computing Services Spending Relative to 2012, by Company Size Figure 8. Change in 2013 Cloud Computing Services Spending Relative to 2012, by IT Purchasing Patterns Figure 9. Percent of Overall 2013 IT Budget Allocated to Cloud Computing Services Figure 10. Usage Trends for Software-as-a-Service (SaaS) Figure 11. Usage of Software-as-a-Service (SaaS) Increases from 2011 to Figure 12. Applications Organizations Have Deployed via the SaaS Model Figure 13. Extent of SaaS Usage, Now and 36 Months from Now Figure 14. Applications Potential SaaS Users Plan to Deploy over the Next 12 Months Figure 15. Usage Trends for Infrastructure-as-a-Service (IaaS) Figure 16. Usage of Infrastructure-as-a-Service (IaaS) Fluctuates Between 2011 and Figure 17. The Elastic and Temporary Nature of Cloud Infrastructure Services Figure 18. Most Organizations that Have Used Cloud Infrastructure Services Would Likely Do So Again Figure 19. Cloud Infrastructure Services Organizations Currently Use or Expect to Use over the Next 12 Months 24 Figure 20. Future Server Deployments: Onsite vs. Cloud (Current vs. Potential IaaS Users) Figure 21. Expected Impact of Public Cloud Computing on IT Strategies Figure 22. Expected Impact of Public Cloud Computing, by Usage of Cloud Computing for Cost Mitigation Figure 23. Usage Trends for Software-as-a-Service (SaaS), by IT Purchasing Patterns Figure 24. Usage Trends for Infrastructure-as-a-Service (IaaS), by IT Purchasing Patterns Figure 25. Usage Trends for Software-as-a-Service (SaaS), by Age of Organization Figure 26. Usage Trends for Infrastructure-as-a-Service (IaaS), by Age of Organization Figure 27. Survey Respondents, by Job Responsibility Figure 28. Survey Respondents Budget Responsibility/Familiarity Figure 29. Survey Respondents, by Number of Employees Figure 30. Survey Respondents, by Industry Figure 31. Survey Respondents, by Annual Revenue Figure 32. Survey Respondents, by Total 2013 Budget for All IT Products, Staffing, and Services Figure 33. Survey Respondents, by 2013 IT Budget Allocations Figure 34. Survey Respondents, by Number of IT Staff Figure 35. Survey Respondents, by Number of Data Centers Figure 36. Survey Respondents, by Number of Production Servers Figure 37. Survey Respondents, by Usage of Server Virtualization Technology Figure 38. Survey Respondents, by Percentage of x86 Servers Virtualized Figure 39. Survey Respondents, by Length of Organizations Existence (i.e., Age of Organization) Figure 40. Survey Respondents, by Region Figure 41. Survey Respondents, by Purchasing Pattern for IT Products and Services Figure 42. Survey Respondents, by Perspective on Data List of Tables Table 1. Usage Trends for Public Cloud Computing Services, by 2013 IT Budget... 8 Table 2. Usage of Public Cloud Computing Services as a Cost Mitigation Strategy Has Doubled Since Table 3. Change in 2013 Cloud Computing Services Spending Relative to 2012, by 2013 IT Budget Table 4. Percent of Overall 2013 IT Budget Allocated to Cloud Computing Services, by Age of Organization and Usage of Cloud Computing for Cost Mitigation... 15

14 Table 5. Usage Trends for Software-as-a-Service (SaaS), by Company Size and Production Servers Table 6. Usage Trends for Infrastructure-as-a-Service (IaaS), by 2013 IT Budget and Production Servers Table 7. Previous Usage of Cloud Infrastructure Services (IaaS), by Age of Organization and Production Servers. 23 All trademark names are property of their respective companies. Information contained in this publication has been obtained by sources The Enterprise Strategy Group (ESG) considers to be reliable but is not warranted by ESG. This publication may contain opinions of ESG, which are subject to change from time to time. This publication is copyrighted by The Enterprise Strategy Group, Inc. Any reproduction or redistribution of this publication, in whole or in part, whether in hard-copy format, electronically, or otherwise to persons not authorized to receive it, without the express consent of The Enterprise Strategy Group, Inc., is in violation of U.S. copyright law and will be subject to an action for civil damages and, if applicable, criminal prosecution. Should you have any questions, please contact ESG Client Relations at

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