Published on the 05/09/2013 | Written by Newsdesk

The forecast hails a shift into ‘chapter two’ of cloud adoption, where businesses are focused on innovation and industry transformation…

Analyst IDC has forecast that worldwide spending on public IT cloud services will reach $47.4 billion in 2013 and is expected to be more than $107 billion in 2017Predictions also show these services will have a compound annual growth rate of 23.5% to 2017 – five times that of the IT industry as a whole.

As one of the key technologies enabling the industry-wide shift to the ‘3rd Platform’ for IT growth and innovation (built on mobile devices, cloud services, social technologies, and big data­) cloud computing has played a crucial role in changing the way companies consume and use information technology.

Now IDC notes there are signs that cloud services are starting to shift into a chapter two phase where the scale of cloud adoption will not only be much bigger, but also more user and solution driven. In this phase of growth, cloud and the other 3rd Platform technologies will become even more interdependent as they continue to drive growth and innovation across all industries that depend on IT.

“The first wave of cloud services adoption was focused on improving the efficiency of the IT department,” said Frank Gens, senior vice president and chief analyst at IDC.

“Over the next several years, the primary driver for cloud adoption will shift from economics to innovation as leading-edge companies invest in cloud services as the foundation for new competitive offerings. The emergence of cloud as the core for new ‘business-as-a-service’ offerings will accelerate cloud adoption and dramatically raise the cloud model’s strategic value beyond CIOs to CXOs of all types.”

IDC says the expanding variety of cloud deployment options is an important factor in driving growth in public IT cloud services spending and the growing richness of these options is a clear accelerator for overall cloud services adoption.

The emergence of virtual private cloud (VPC) offerings has helped to shift momentum from dedicated private cloud offerings toward public (shared/multi-tenant) cloud offerings.
By offering the attributes of public cloud (economics, scale, pace of innovation) with some of the privacy and control features associated with private cloud, VPCs are effectively addressing many of the objections that have held customers back from the cloud model.

The analyst warns, ohowever, that while commoditisation is expected to result in lower pricing and tighter profit margins, the competition will greatly expand the addressable market of solutions and customers. In order to survive, providers will have to scale their offerings “up and out” toward a broader range (and dramatically larger number) of customers.

The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period.

By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage. Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and IaaS, with CAGRs of 29.7% and 27.2%, respectively.

“In this second phase of cloud development, it will be essential for cloud services providers to re-examine their cloud strategies, preparing for a marketplace focused intensely on business innovation, industry transformation, and increasingly pressured pricing and operating models,” noted Gens.