Tech & Sourcing @ Morgan Lewis


As companies adjusted to the “new normal” of coronavirus (COVID-19) restrictions, spending on cloud services has seen a boom. Spending by companies on cloud services exploded in the second quarter to a record $34.6 billion, up approximately 11% from the first quarter of 2020 and 30% from the same period last year, according to research firm Canalys, as reported by the Wall Street Journal.

A shift to remote working by a majority of companies in response to the pandemic as well as many businesses looking to grow their online and ecommerce presence has created a strong demand for cloud-based applications to support such endeavors and has led to an uptick in the number of new commercial transactions related to cloud services. “Organizations that had applications running in on-premises environments were compelled to move them to the cloud, because if people couldn’t get to work, that data center was useless,” said Sid Nag, a vice president at IT consulting firm Gartner Inc. in a recent interview with the Wall Street Journal.

The growth in cloud spending stands in stark contrast to the economic fallout sparked by the pandemic, which saw the real gross domestic product decrease at an annual rate of 32.9% in the second quarter, according to the advanced estimate released by the Bureau of Economic Analysis.

In these trying economic times, businesses have an increased focus on improving the bottom line, and switching to cloud services solutions is one way to accomplish that goal. By switching to a subscription-based cloud services model, companies are able to spend less cash upfront when compared to costs of setting up on-premises capabilities or traditional software licenses.

With no end in sight to the COVID-19-related lockdowns, disruption, and other mitigation efforts, it is certain that the pandemic will continue to shape how companies do business and it appears that the demand for cloud services will only continue to increase. We will continue to monitor the effects on the technology, outsourcing, and commercial transactions markets.

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