IDC: Increased Services, Pullback From Public Clouds Huge IT Disrupters


The IT industry is in a state of disruption as the U.S. economy moves towards an ever-increasing focus on services, opening the way for service providers to grow their businesses, especially in such key areas as security.

Michelle Bailey, global vice president and general manager and research fellow for data center and cloud at market research firm IDC, on Wednesday also told an audience of solution providers and MSPs at this week's IGEL Disrupt conference in San Jose, Calif. that up to 50 percent of public cloud workloads will be repatriated to private clouds or on-premises infrastructures.

Trends like artificial intelligence and digital infrastructures are going to be front and center as the services industry struggles to catch up with the rest of the economy in terms of productivity, Bailey said.

[Related: AWS re:Invent 2018: 21 New Ways To Connect Storage To AWS]

Sponsored post

About 86 percent of the U.S. economy is based on services, with about 13 percent in manufacturing and mining and 1 percent in agriculture, forestry, and fishing, Bailey said. Healthcare has become the No. 1 employer in the U.S., but it is an area that is hard to automate, she said.

However, over the last 75 years, while productivity in agriculture and forestry has risen by 10 times and manufacturing and mining by seven times, efficiencies in the services industry has only doubled, Bailey said.

It is important to today's economy to drive services efficiencies, Bailey said. "And that will require more innovation," she said.

On average, about 48 percent of IT spending today goes to digital infrastructure compared to 52 percent on physical infrastructure, Bailey said. In two years, IDC expects 57 percent of IT spending to go to digital infrastructure, although there will be a lot of companies unable to keep up with the transition to digital infrastructure. "They're going to need a lot of help and hand-holding," she said.

Artificial intelligence, especially the early automation and self-healing phases of AI, is expected to help bring the efficiencies of the services part of the economy in line with the other parts, Bailey said. "So you are going to be heavily involved in AI," she said.

The adoption of AI will not likely lead to a decrease in employment, Bailey said. However, it will lead to big shifts in the kinds of jobs people hold, with an increasing emphasis going forward on global employees, contractors, and freelancers; machine-assisted co-workers; and multi-generational co-workers.

These employees are more likely than ever to work from home or remote offices or coffee shops, and as a result will not be interested in a traditional standardized device, she said.

"Hybrid is the new normal everywhere," she said. "It's not going to be either/or."

Hybrid IT is driving businesses to adopt the cloud, with a focus on multi-cloud implementations which account for 64 percent of cloud adoptions compared to 28 percent for single-cloud adoptions and 7 percent for hybrid cloud adoptions, Bailey said.

Nearly 70 percent of multi-cloud environments are either built by or managed by service providers, while only 32 percent are self-built and self-managed, she said.

However, she said, 81 percent of customers reported the repatriation of workloads from public clouds to on-premises private cloud, hosted private cloud, or on-premises non-cloud infrastructures, a figure expected to rise to 85 percent in 2019.

Customers in a 2018 survey said they expect about 50 percent of their public cloud applications will move to private cloud or on-premises infrastructures over the next two years, with security issues driving about 19 percent of that move, performance issues 14 percent, and cost issues 12 percent, she said.

This move to repatriate workloads away from public clouds presents service providers real opportunities, Bailey said. "As service providers, you have to provide that infrastructure," she said.

When it comes to building some kind of cloud environment, only about 20 percent of the budget is spent on infrastructure or hosting, Bailey said. The rest is spent on SaaS and hosted applications, managed services, security services, and professional services, she said.

About 53 percent of businesses are using managed security services, making that category the largest type of managed service customers have adopted, Bailey said. The top managed security service adopted by clients is web application firewalls, followed by endpoint security, advanced anti-malware security, secure configuration management, data encryption, SIEM (security information and event management), data loss protection, and identity access management, she said.

For IGEL channel partners attending the IGEL Disrupt conference, Bailey's remarks seemed to have hit close to their own experience.

Bailey underlined a trend that Forthright Technology Partners has been watching for some time, said Carl Gersh, director of sales and marketing for the Miramar, Fla.-based solution provider and IGEL channel partner.

More and more organizations are looking at hybrid and multi-cloud environments," Gersh told CRN. "The most appropriate cloud provider, public or private, is what best handles customers' workloads. It's not about the desktop anymore. It's about making it easy for people to work from anywhere."

As a solution provider with a big healthcare focus, Bailey's remarks about the size of the U.S. healthcare industry and the shift from infrastructure to services seemed right on target, said Cynthia Meinke, director of sales at Coretek Services, a Farmington Hills, Mich.-based MSP and IGEL channel partner.

"We built our business on the infrastructure side, but we have been moving to services," Meinke told CRN. "This tells us we're on the right track."

Meinke also said it was kind of a shock to see how much of public cloud workloads is being repatriated to private clouds or on-premises infrastructures. "I feel confident in our business and the future because of that," she said.

The amount of workloads being repatriated from public clouds in part because of security concerns is very interesting for service providers, said Dan Crump, solutions builder for Alchemy Tech Group, a Houston, Texas-based solution provider and MSP.

"One would like to think cloud providers have the greatest security," Crump told CRN. "But a lot of people running enterprise IT realize they have the same tools the cloud providers have, for instance, when they combine IGEL endpoint management with Nutanix hyper-converged infrastructure."

Bailey's comments about customers' moving to repatriate cloud workloads from public clouds to private clouds and on-premise infrastructure struck home for Dan Wons, practice director for cloud and automation at Burwood Group, a Chicago-based systems integrator and IT consultant.

"This validates a hunch I've had for a long time that people are rushing to the cloud without thinking it through," Wons told CRN. "There's so much buzz around the cloud. But as a consultant, we tell customers that some apps make sense to go to public clouds, some make no sense in public clouds, and some can go but need to be changed. They don't want to rush."