The global public cloud market is growing faster than expected, and is poised to become an industry that generates more than $400 billion annually by 2020, according to research firm Gartner
New data released by Gartner this week shows public cloud revenue will jump by 18.5 percent in 2017 to more than $260 billion, an increase in spending on cloud services that analysts noted exceeds previous projections. The data also projects that the public cloud will continue being dominated in the immediate future by just a few providers.
Overall, rapid growth in the public cloud has been driven mostly by strong demand for Infrastructure-as-a-Service and Software-as-a-Service offerings.
According to Gartner, IaaS revenue is projected to increase by nearly 37 percent to $34.7 billion and SaaS revenue expected to grow by 21 percent to $58.6 billion in 2017. SaaS revenue, in particular, exceeded expectations in 2016 and is helping spur growth in the overall public cloud market, said Gartner analyst Sid Nag.
“Final data for 2016 shows that Software as a Service (SaaS) revenue was far greater in 2016 than expected, reaching $48.2 billion,” Nag said. “SaaS is also growing faster in 2017 than previously forecast, leading to a significant uplift in the entire public cloud revenue forecast.
The increase in SaaS adoption is to cloud providers delivering more applications and add-ons as a service, Nag said.
But Nag noted that the highest revenue growth in the public cloud market is expected to come from the IaaS sector. Gartner projects IaaS revenue will grow by more than 185 percent between 2016 and 2020, increasing from $25.4 billion to $72.4 billion.
And while public cloud revenue has been growing at a faster rate than Gartner had previously forecast, analysts are projecting that “growth will even out from 2018 onwards.”
The pace of annual revenue growth is expected to level out to 15.6 percent by 2020, when organizations are expected to spend more than $411 billion on public cloud market services. That stabilization “reflects the increasingly mainstream status and maturity that public cloud services will gain within a wider IT spending mix,” Nag said.
Additionally, Gartner is projecting that only a small slice of cloud providers will end up reaping most of the revenue windfall in the next several years. The top 10 public cloud providers, a roster that includes companies like Amazon, Microsoft, Alibaba and Google, are expected to command 70 percent of all public cloud revenue through 2021, according to Gartner.
“In the IaaS segment, Amazon, Microsoft and Alibaba have already taken strong positions in the market,” Nag said. “In the SaaS and PaaS segments, we are seeing cloud’s impact driving major software vendors such as Oracle, SAP and Microsoft from on-premises, license-based software to cloud subscription models.”