The amount of software running on traditional servers is set to almost halve in the next 3 years amid the shift to the cloud, and it's great news for the data center business

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• Software running in on-premise data centers are expected to make up only 32% of all business applications by 2022, down from 63% today, according to a Morgan Stanley report based on a survey of CIOs.
• This points to the steady shift to cloud computing, which is also highlighted by the growth of the data center business.
• However, Morgan Stanley also pointed to a more downbeat view of long-term IT spending.
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Businesses are giving on up data centers at a steady rate, as they move to the cloud. In fact, the amount of software running on servers on premise is expected to be cut in half in just three years, according to Wall Street analysts.

Business software running on premise are projected to make up only 32% of all applications used by enterprises in 2022, down from 63% today, according to a Morgan Stanley report issued last week. Meanwhile, business at public data center facilities in the US used by big cloud providers is getting stronger, with occupancy rates of roughly 87%.

The report, which was based on a survey of chief information officers (CIO), underscores the ongoing shift to the cloud, where businesses are able to set up their networks and use applications on web-based platforms, such as those run by Amazon, Microsoft and Google. For businesses, particularly large enterprises, the trend has led to dramatic cuts in IT costs.

"Cloud computing remains on top of the CIO priority list," Morgan Stanley analysts said in a separate report.

Corporate IT budgets are expected to edge higher by roughly 5%, in line with the average over the past four years, the report said.

However, the Morgan Stanley reports also pointed to signs of a broader slowdown in business IT.

"2019 IT growth expectations remain solid, but the future gets a bit cloudier," the report said. Only 28% of CIOs said they expected IT spending to increase in the next three years, down from 38% the previous quarter, the report said.

Other tech companies, including Hewlett Packard Enterprise and chip giants, Intel and Nvidia, had also pointed to a dip in the enterprise market, as an expected data center build out did not materialize. The growing uncertainty related to the trade policies of the Trump Administration have led to a more cautious outlook, especially in tech spending.

"As uncertainty around global trade policies remain unresolved and business confidence and capex [capital expenditures] slow to multi-year slows, market impacts are becoming more pronounced and CIOs may be beginning to re-evaluate the areas of IT spend that will prove most durable," the report said.

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