Public Cloud Services Spending to Grow Rapidly, Gartner and IDC Say

Spending in 2016 will hit $204 billion, according to Gartner analysts, while IDC says it will reach more than $141 billion by 2019.

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Spending on public cloud services will increase sharply this year and through 2019, according to analysts with IDC and Gartner.

In a report Jan. 25, Gartner analysts said the global public cloud services market will jump 16.5 percent this year compared with 2015—to $204 billion—with the infrastructure-as-a-service (IaaS) segment being the key driver, growing 38.4 percent to $22.4 billion. The largest segment will continue to be cloud advertising, which will hit $90.3 billion in spending, growing 13.6 percent.

"IaaS continues to be the strongest-growing segment as enterprises move away from data center build-outs and move their infrastructure needs to the public cloud," Gartner Research Director Sid Nag said in a statement. "Certain market leaders have built a significant lead in this segment, so providers should focus on creating differentiation for success."

The remaining market segments also are expected to increase this year, from business process services—or business processes-as-a-service (BPaaS)—at 8.7 percent growth to software-as-a-service (SaaS), at 20.3 percent, as software makers continue to migrate their business models from on-premises licensed software to public cloud-based offerings, the analysts said.

These trends will only continue, Nag said.

"The market for public cloud services is continuing to demonstrate high rates of growth across all markets and Gartner expects this to continue through 2017," he said. "This strong growth continues to reflect a shift away from legacy IT services to cloud-based services, due to an increased trend of organizations pursuing a digital business strategy."

In a report issued last week, IDC analysts took a look at projected market growth in public cloud spending between 2014 and 2019, when the space will increase by 19.4 percent, to more than $141 billion. The growth rate is almost six times the rate of overall IT spending during that time, the analysts said.

Public cloud spending in 2015 was almost $70 billion, according to IDC.

The analysts said that SaaS will continue to be the dominant cloud computing type, grabbing more than two-thirds of all the spending. However, spending on IaaS and platform-as-a-service (PaaS) will grow at a faster rate than SaaS, at 27 percent and 30.6 percent, respectively.

"Over the past several years, the software industry has been shifting to a cloud-first (SaaS) development and deployment model. By 2018, most software vendors will have fully shifted to a SaaS/PaaS code base," Frank Gens, senior vice president and chief analyst at IDC, said in a statement. "This means that many enterprise software customers, as they reach their next major software upgrade decisions, will be offered SaaS as the preferred option. Put together, new solutions born on the cloud and traditional solutions migrating to the cloud will steadily pull more customers and their data to the cloud."

Looking back, discrete manufacturing (at $8.6 billion), banking ($6.8 billion) and professional services ($6.6 billion) were the industries that spent the most on the public cloud, though by 2019, professional services will move ahead of banking for the No. 2 slot, IDC analysts said. Telecommunications will be the fastest growing industry between 2014 and 2019, hitting a 22.2 percent annual pace. Media, state and local government, education, retail, transportation and resource industries also will see grow rates higher than 20 percent.

"Industry-specific applications will be a driving force as businesses look for solutions that can be easily configured to their unique business and vertical requirements," Eileen Smith program director of customer insights and analysis at IDC, said in a statement. "With the huge increase in the number and diversity of services available in the market, organizations across the industries will shift steadily toward cloud-first strategies to enable digital transformation."