By 2020 it is expected that more than $195 billion will have been spent on services in the public cloud, according to market researchers at IDC.
That would be more than twice the $96.5 billion reckoned to have been spent so far. For the forecast period 2015 to 2020 this would represent a compound average growth rate (CAGR) of 20.4 percent. So this is great news for all companies offering cloud-based services, while those who provide or favor on-premise technologies – or hold shares in such businesses – will receive this news with trepidation. Enterprise kit-makers addressing their products to large corporate customers will feel particularly uneasy predicts British industry news service “The Register”, unless they are in a position to start supplying cloud operators.
Cloud software which comprises all three core software markets – applications as a service, system infrastructure software (SIS) as a service (which together constitute soft ware as a service or SaaS), together with application development and deployment (AD&D) which is also known as platform as a service (PaaS) – accounted for the lion’s share of software earnings with 83.7 percent of total public cloud revenue in 2015, while the remaining 16.3 percent fell under the scope of infrastructure as a service (IaaS). Over the next few years, however, IaaS and PaaS are expected to grow more strongly than SaaS, increasing their share of total revenue.
Software increasingly from the cloud
During the following five years cloud software is expected to outpace more traditional product delivery methods, growing almost three times faster than the overall market for software and becoming the most important driver of growth for all functional software markets. Benjamin McGrath, Senior Research Analyst for SaaS and Business Models at IDC, predicts: “By 2020, about half of all new business software purchases will be of service-enabled software, and cloud software will constitute more than a quarter of all software sold.”
Sectors identified by IDC as spending most on the public cloud are the manufacturing of discrete goods, banking and the provision of services, which together accounted for nearly a third of earnings in 2016. Experts expect the most substantial vertical growth over the next five years to come from the media, telecommunications and trade sectors. As a whole, however, all 20 sectors included in the IDC report are expected to increase their expenditure by more than 100 percent over the forecast period.
Strong growth across all sectors and regions
“Cloud computing is breaking down traditional technology barriers as line-of-business leaders and their IT organizations rely on cloud to flexibly deliver IT resources at the lower cost and faster speed that businesses require,” explains Eileen Smith, Program Director for Customer Insights and Analysis at IDC. Enterprises in all sectors now have the opportunity to adapt more quickly to changes in the marketplace and take more risks, as they are no longer held back by their legacy IT constraints.
Geographically, the USA is by far the largest market for public cloud services, constituting almost two-thirds of global revenue. Trailing behind the US are Western Europe and Asia/Pacific (excluding Japan). The greatest growth in revenue is expected Latin America and APAC (without Japan) according to the IDC forecast. But none of the regions is predicted to experience gains of less than 100 percent over the forecast period, the prognosis goes on to say.