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July 21, 2016

Cloud to disrupt $1 trillion in IT spending despite businesses dragging their heels

News: Intel misses analyst expectations as Azure customers demand more time.

By James Nunns

Cloud disruption is due to affect more than $1 trillion in IT spending but not all business are keeping up with the pace of change.

According to Gartner more than $1 trillion in IT spending will be directly or indirectly affected by the shift to cloud in the next five years, making it one of the most disruptive forces of IT spend.

While many businesses have already taken the dive into a cloud first strategy, many are still testing the waters or are perhaps unwilling to move as quickly as cloud service providers would perhaps like.

The impact of this has seen Microsoft reveal a rollover of certificates for Azure Active Directory being delayed. According to the company the rollover date has been pushed back due to feedback from the community asking for more time to get ready for the event.

In addition to this Microsoft has also delayed the depreciation of older versions of Azure Storage Service, again giving customers more time to upgrade.

The idea had been for Microsoft to kill of old versions of the service on the 1st August 2016, now they will run indefinitely and the company has promised a year of warning before any other Azure services are ended.

This slow pace of movement has impacted companies like Intel which heavily relies upon CPU sales into data centres, with pace of demand for more cloud capacity appearing to slow it means that there will be less spent on Intel’s X86 Xeon chips.

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The impact of this has been seen in Intel’s Q2 2016 financial results which saw the company miss analyst expectations in some key categories.

Overall revenue was $13.5bn, up 3% year on year while net income was $1.3bn, down 51% from $2.7bn a year ago; this is mainly due to restructuring costs.

The Client Computing Group booked sales of $7.3bn, down 3% year on year and overall volumes were down 15%, however, the average selling prices were up 13%.

In the Data Centre Group there was $4bn in booked sales, up 5% but operating income was down 4% to $1.77bn from $1.8bn last year.

While there was 5% growth in sales this is less than the 8% analysts had expected, and down further from the 11% growth for Q2 2015.

Intel remained positive on the potential for further demand from companies like Amazon Web Services and Google, Brian Krzanich, CEO, Intel said: “The cloud that we have today is really built on the backs of people. It's your Facebook data, it's your Salesforce data, it's your Twitter data. The current estimates are, if you look out into 2020, that average person will generate about 1.5GB a day of data off those devices, and those are going to be all your posts and pictures and all that kind of information.

“If you take a look at the average autonomous car in 2020, the estimates right now are it will throw off about 40GB a minute of data. If you take a look at the average autonomous drone doing some kind of scan, looking for somebody lost in the forest or scanning a mine, it's going to throw off about 20GB a minute.

“So it's that growth in data and the need to both process it at the edge and then through the data center and into the cloud, to be able to store it, to be able to apply machine learning to all of those applications. Those all tell me that the cloud is going to continue to grow.”

With Gartner predicting continued disruption caused by the cloud, it is looking likely that those cloud service providers will again be required to build more data centres, which will be a boost to Intel.

However, as Microsoft has shown with Azure, that pace of adoption may not be as fast as expected and could lead to a few years of sluggish growth.

Google for one though is continuing to move ahead with building data centres as the company adding more cloud computing capacity available from Oregon data centre.

The company is adding 10 new cloud data centre facilities through 2017 and the addition of capacity to the Dalles facility will reduce latency by 30% to 80% for some customers, Google said.

This is of course is designed to improve service to customers but is also part of Google’s strategy to try and catch up in the cloud market with AWS and Microsoft Azure.

AWS has 13 active cloud regions and has plans for four more while Microsoft has 26 regions with eight more to come.

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