IT Topics to Watch for in 2018

Which IT topics should we be keeping an eye out for in 2018? I expect network, XaaS, and services to be areas of particular interest. This article focuses on the reported and estimated earnings in these respective areas. My sources for this post are Cleveland Research, Company Reports, CRC, and Factset Estimates.

Let’s start from the thirty thousand foot view and take a look at overall enterprise IT spending: reported earnings, estimated earnings, growth rates, and market share. One thing that is notable is the gradual decline in physical server spending, starting with reported revenue in 2016. In 2016, the reported spending on physical servers was around $18.6 million, and that turned out to be a three-percent decrease year over year. This was the first reported decline since 2011. The estimated revenue for 2017 is around $18.3 million, a one-percent decrease year over year. 2018 is expected to be the same year over year, with estimated earnings of around $18.2 million. I consider this to be an indicator of the corporate cloud initiatives that are being implemented, reducing the need for as much on-site compute power. I expect this trend to continue for a time and then level off for a while.

In this era of the software-defined data center (SDDC), you cannot look at the revenue from physical servers without taking a look at the enterprise physical network spending. In 2016, the reported physical network spending was around $35.6 million, and that represented a five-percent decrease year over year. The 2017 estimated earnings are around $35 million, a two-percent decrease year over year. 2018 is looking a little brighter, with estimated earnings at around $35.6 million, replacing the two-percent decrease with a two-percent increase. I want to mention that reported earnings for 2015 were around $37.4 million, a five-percent increase year over year. This means that over the last four years, physical network sales have been flat over the long run.

There is a bright spot in the network area of IT Topics, and that is network security. This area has had solid increases year over year since 2010. The reported earnings from the network security space were around $17.3 million, a six percent increase year over year, and estimates for 2017 and 2018 follow the same trend. I believe this trend will continue for a little while, even more so after any major security breaches.

There is an area that has been and is still growing in leaps and bounds year over year, and that area is Anything as a Service, also called Everything as a Service (XaaS). XaaS first started getting measured back in 2011, when reported revenue was around $5 million. This increased to $6.8 million in 2012, which is around a thirty-six percent increase year over year. Then in 2013, the reported revenue from XaaS came in around $12.2 million, a seventy-nine percent increase year over year. 2014 was almost as good, with revenue reported at around $21.3 million and a seventy-five percent increase year over year. In 2015, things started to slow down a bit, with revenue reported at $32.8 million, a fifty-four percent increase. In 2016, reported revenue was around $48.3 million, a forty-eight percent increase year over year. The estimated revenue for 2017 was set at $68.5 billion, a forty-two percent increase year over year. Finally, the estimates for 2018 have been set at $91.2 million, which would be a thirty-three percent increase year over year. XaaS, or even just As-a-Service, is the area that I think is showing the most consistent growth. I believe it will be a driving factor and force in the cloud space as an increasing number of products are offered as more of an As-a-Service model. VMware announced at VMworld that the new products and services it is bringing to market will be on a subscription-basis, As-a-Service model, and I expect that this change might carry over into other areas of the portfolio.

The last IT Topics point to share is the reported revenue from enterprise software, which has been on the decline since at least 2011. I expect this trend to continue as XaaS continues its growth. The negative side of the XaaS rise would be the decline in actual software sales. This is just the double-edged sword of progress and advancement. One thing you can count on with technology is that things are going to change, and companies must do the same to stay relevant now and in the future. The revenue models are changing, and now we see how companies will adapt as we consider the IT topics to watch in 2018.

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