- CIOs surveyed by Morgan Stanley said they plan to keep more data on-premise over the next few years.
- Analysts said CIOs are leveling out their expectations after a pandemic-driven rush to the cloud.
- The results track with the debate over cloud costs and moving data back on-premise to save money.
- See more stories on Insider’s business page.
Companies may finally be ready to tap the brakes after a pandemic-driven rush to adopt cloud services, according to a Morgan Stanley analyst report published earlier this month.
The report suggests that the boon for Amazon, Microsoft, and Google’s cloud platforms, which carried all three to the strong second quarter earnings they announced this week, might be tempered as companies level out their expectations for IT projects after the pandemic-led push for digital transformation.
Morgan Stanley’s report is based on a survey of 100 enterprise chief information officers, or CIOs, primarily from financial services, manufacturing, and healthcare firms.
The execs told analysts that the workloads – or data and applications – they plan to move to the cloud from their own data centers over the next year is less than it was before: decreasing from 29% in the fourth quarter of 2020 to 24%. When projecting for the next three years, the number of workloads decreased from 49% in the second quarter of 2020 to 37%.
This downward trend seems to be a resetting of expectations compared to the mad clip of migrations during the pandemic, according to the analysts.
“Our interpretation of this result is that while Covid accelerated the initial migration of mission-critical workloads to Cloud, now that these migrations have been completed, CIOs are building in more realistic timelines,” the analysts wrote.
The execs also want more of their IT infrastructure to be on-premise, or in their own data centers, they told Morgan Stanley. Over the next three years, they plan to keep 43% of workloads on-premise, compared to 37% in the second quarter of 2020.
That trend also tracks with a recent debate over the costs of cloud computing and the merits of moving workloads back to data centers, spurred by a blog post by Andreessen Horowitz partners Sarah Wang and Martin Casado.
Casado recently told Insider that moving workloads back to data centers is one solution to the disproportionately high costs of cloud for software companies.
But other analysts still don’t think the Big Three cloud providers need to be concerned. The pandemic set off a cloud transformation that won’t simply disappear overnight, they say, and Amazon, Microsoft, and Google have such a stronghold over the market that most companies will eventually use their services, one way or another.
“For several quarters, critics have questioned whether Microsoft could maintain its growth in cloud with the Azure number in focus,” wrote Futurum Research analyst Dan Newman. “Microsoft, however, delivered about 50% growth at Azure last quarter.”
Wedbush Securities managing director Dan Ives also says there’s much more growth to come, with the firm predicting that workloads in the cloud will increase from 40% to 55% next year.
“With this highest IT priority front and center, we believe 85%-90% of these cloud deployments have already been green lighted by CIOs and healthy cloud budgets already in place for 2H2021,” Ives wrote in a note to investors.
Plus, the gradual return to offices as companies cut back on all-virtual work is a good sign for cloud providers, Ives added: “We believe this overall WFH and hybrid environment shift has accelerated the cloud trend as more CIOs are being forced to face the new normal/reality for their respective organizations looking ahead.”