Nearly a third of IT budgets go for hosting, cloud services

Organizations now spend 28 percent of their total IT budgets on hosting and cloud services, according to 451 Research’s Voice of the Enterprise: Hosting and Cloud Managed Services study.

Next year, that number is expected to increase to 34 percent, indicating a growing reliance on external sources of infrastructure, application, management and security services, the report noted.

Although hosting and cloud providers frequently position themselves as primarily providers of infrastructure, 451 Research found that just 31 percent of spending goes toward infrastructure services while nearly 70 percent of enterprise budgets for hosting and cloud is being spent on other services. These include application services (42 percent), managed services (14 percent), security services (9 percent); and professional services for cloud enablement (5 percent).

The research shows that a significant portion of hosting and cloud services spending is on unmanaged or self-managed infrastructure or application services. Nearly half—44percent of infrastructure services spending and 49percent of application services spending—is for products that are bundled with additional managed or security services.

“The markets for unmanaged IaaS [infrastructure-as-a-service] and SaaS [software-as-a-service] are dominated by large, hyper-scale vendors,” said Liam Eagle, research manager at 451 Research and lead author of the study. “However, this spending trend indicates there is an appetite for the type of bundled services a broader market of managed service providers are well positioned to deliver.”