Cloud Helps Industries Innovate, Though Spending in Central and Eastern Europe Still Lags Global Trends
Cloud services, both public and private, are among the most dynamic areas of IT market growth in Central and Eastern Europe (CEE), and spending on them is expected to reach $2.5 billion in the region in 2020. While this figure is impressive enough at first glance, it reflects a market that is still behind the global uptake trend.
Who are the regional leaders?
IDC's Central and Eastern Europe Cloud Services Market 2016–2020 Forecast and 2015 Vendor Shares report shows cloud services offerings growing energetically in the region, expanding several times faster than most traditional IT categories. The increasingly positive perception of cloud in CEE goes hand in hand with the advance of steadily developing, innovation-minded economies such as the Czech Republic, Poland, Hungary, and Slovenia.
In 2015, public and private cloud services spending in CEE reached $870 million (23.7% year-on-year growth). While, in 2016, expenditures on public and private cloud services in CEE increased by 24.9% year on year. This level is expected to remain more or less stable through 2020.
“In the years to come, the volume of deployed pure cloud offerings as a standalone service will decrease, while demand for cloud services as support for business transformations will grow,” said Petr Zajonc, program manager at IDC. “More and more 3rd Platform components involving mobility, social media, Internet of Things, and analytics technologies will be delivered as part of complex solutions.”
More developed country markets will look for transformative business models
The CEE market is still relatively underdeveloped, at least compared to economies such as the United States or Western Europe, where cloud adoption levels are higher. The accelerated growth rates can thus be seen as CEE taking steps to “catch up."Poland and the Czech Republic are expected to be among the leading CEE spenders on public cloud. According to IDC's Worldwide Semiannual Public Cloud Services Spending Guide, Poland and the Czech Republic will account for, respectively, 16.1% and 12.4% of regional public cloud spending in 2017. Hungary and Romania are expected to post the fastest regional public cloud spending growth over the forecast period, with CAGRs of 27.5% and 25.7%, respectively. Nearly all CEE geographies are expected to record CAGRs greater than 20%.
Cloud solutions are gaining in popularity across industries. In the professional services field, they are helping user organizations to concentrate almost exclusively on their area of expertise by offloading their IT requirements. In the finance and utility sectors, cloud is enabling businesses to reduce their in-house IT demands and develop more agile, effective, and transformative business models. In general, cloud is a tool for speeding up innovations and achieving savings on areas of IT that do not contribute to competitive advantage.
Cloud is replacing traditional outsourcing categories, and the trend of moving infrastructure and workloads from internal server systems to commercial datacenters, and from internal management to third-party providers, will gain momentum in the coming years. In practice, this may result in an organization's on-premises software being utilized by cloud-delivered software as a service (SaaS) and platform as a service (PaaS), and its hardware by cloud-delivered infrastructure as a service (IaaS).
CEE spending will get a boost from Smart City initiatives
According to IDC's Spending Guide, SaaS is by far the dominant cloud-delivered service in CEE. SaaS is expected to capture 67.5% of all public cloud spending in 2017, a share it is expected to more or less retain through 2020. SaaS is expected to post a CAGR of 21.73% over the forecast period, while PaaS and IaaS will post marginally bigger CAGRs (22.5% and 22.3%, respectively).
Spending on SaaS, which is comprised of applications and system infrastructure software, is expected to be dominated by applications purchases, most notably enterprise resource management, customer relationship management, and collaborative applications.
Professional services, retail, and the process manufacturing industries are predicted to have the highest cloud services spending levels in CEE. Combined, these industries will account for 31.8% of cloud services spending in 2020, according to IDC's Spending Guide.
"Discrete and process manufacturing are predicted to be the fastest growing industries, reflecting the rise of industry cloud spending,” says Jan Alexa, senior research analyst for Government Insights at IDC. “However, the local government vertical is also predicted to significantly outpace the CEE growth average, mainly owing to the spread of Smart City initiatives throughout the region." In terms of company size, large (1,000+ employees) and medium-large (500-999 employees) businesses will register the highest CAGRs, at 28.7 and 26.4%, respectively.
From a vendor perspective, cloud services will remain the most competitive and diverse IT sector in CEE. Global and local providers, new players and traditional IT companies, IT vendors, telecommunications operators, and non-IT businesses will all vie for market shares. Local cloud services providers are likely to struggle to compete with international players in most areas —except for delivering IaaS. IDC has noted that a significant number of CEE end-user companies prefer their IaaS provider to have a nearby physical location with support in the local language.