Compounding the cloud

As the digitization of the enterprise accelerates on its multi-decade journey, workload migrations, transformations and full code re-writes are expected to be prioritized at an ever increasing rate after COVID-19. Cloud stands to be a key beneficiary with penetration expected to double (10% -> 20%) over the coming 3-4 years, in a total market that will be ~15-20% larger ($716bn -> $837bn)

– Amit Nath


While it may seem “cloud computing” has been around so long it must be getting close to cresting and ushering in the “next big thing”. In reality however, the cloud has barely scratched the surface of its potential. The way corporations utilize technology has been revolutionized by the cloud, with businesses no longer needing to make major investments in equipment, train staff or perform ongoing maintenance in order to have access to an “on-demand” and virtually unlimited pool of computing power, network speed, storage capacity and all of this accessible anywhere via the internet (the essence of “cloud computing”).

Not only is the cloud generally cheaper, more reliable and convenient for enterprises than running private infrastructure, the benefits of it have never been more in focus as they are in the wake of COVID-19. Cloud is one of the industries will be a “beneficiary” of COVID-19 as it was undergoing solid adoption growth prior to the crisis and we have already witnessed an acceleration of this “s-curve”. As companies race to relieve difficulties of managing company owned and run IT infrastructure (“on-premise”), the cloud is setting itself apart as an immediate-term solution.

Now more than ever, the case against on-premise solutions is abundantly clear. They require an on-site labor force to manage servers, outages and cannot quickly scale up/down to accommodate usage. In the wake of COVID-19 industries were unevenly affected with some seeing surge in demand (i.e. Teams, Zoom, Netflix, etc) and others coming to a screeching halt and desperate to cut expenses as demand fell away (i.e. airlines, cruises, hotels, restaurants, etc). Regardless of whether the industry was positively or negatively impacted following COVID-19, having a cloud solution would have been very useful and as businesses look to the future, this has become a core consideration in how capital is allocated going forward.

Not only is cloud useful, it is an enormous market. There is an estimated ~$642bn (2019) worth of on-premise IT infrastructure that could find a home in the cloud, with a much smaller piece ($74bn) already there, implying that the cloud has only penetrated ~10% of its opportunity so far (i.e. data centers, infrastructure software, IT hardware, etc). In all, the total enterprise IT market opportunity for cloud is ~$716bn (2019) which is ~20% ($3.7 trillion) of current annual global enterprise IT spending. Furthermore, cloud’s penetration is expected to double (10% –> 20%) over the coming 3-4 years (through 2023) in a market that will be ~15-20% larger ($716bn –> $837bn).

 Cloud Remains Significantly Under Penetrated; Estimated to grow from ~10% (2019) to ~20% (2023) in a ~15-20% larger market

Source: Gartner, GSGIR


As the structural digitization of the enterprise accelerates on its multi-decade journey, it is expected workload migrations, transformations, and full code re-writes will now be prioritized at an ever increasing rate for businesses looking to emerge stronger or simply survive the shifting landscape after COVID-19. Montaka Global holds several positions which will benefit from this powerful, secular theme, including holdings in Microsoft (MSFT), Alphabet (GOOGL), Alibaba (BABA) and Amazon (AMZN). 

Amit Nath is a Senior Research Analyst with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.