It’s been hard to be a legacy tech company in the age of cloud computing and that isn’t expected to change. Hardware companies have taken it on the chin even more than software providers because, after all, software runs on Amazon Web Services, Microsoft Azure, and Google (goog) Cloud Platform.
But those clouds do not typically rely on hardware or storage from the Hewlett-Packards (hpe) Ciscos (csco), NetApps, and EMCs of the world. Instead, the big cloud providers tend to aggregate and manage non-branded hardware of their own design and manufactured to their specifications.
This week’s news that Amazon (amzn) finally got its Elastic File System out the door could mean more problems for legacy storage providers. EFS is seen as a good way for corporations to move data that had been stored on pricey storage appliances from companies like NetApp (ntap) and EMC (emc) to the Amazon cloud.
Morgan Stanley’s (ms) latest CIO Survey, released Thursday, underscores the issue, noting that public cloud adoption (along with weakness in the European market) continue to stress the hardware segment.
From the survey:
And, on the server side, Hewlett Packard Enterprise (hpe) is most at risk, according to the report authors. IBM (ibm) is also being pressured by cloud but, according to Morgan Stanley, is gaining traction with Watson artificial intelligence technology. Twenty percent of CIOs surveyed said they are either using Watson or plan to do so.
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Overall, Morgan Stanley said it expects IT budgets to grow 3.7% this year, compared to 4.8% growth last year. With CIO respondents expecting more workloads to move from on-site servers to those running in a public cloud, Amazon (amzn) and Microsoft (msft) are expected to see the biggest incremental growth to their businesses. On the flip side, Oracle (orcl) and Dell are expected to lose the largest incremental percentage of the IT budgets due to this cloud move, according to the survey which polled 100 decision makers in IT organizations, 75 of which were in the U.S. and the rest in Europe.
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None of these companies are taking this challenge lying down. Dell and EMC are navigating their mega-merger and Oracle (orcl) has doubled down on cloud. NetApp last year bought Solidfire to bolster its flash storage story.
The question for most of these companies is whether they can build their cloud businesses fast enough to offset declines in their on-premises business, and the jury is out on that.