Double digit growth for public cloud revenue

Published on the 17/10/2017 | Written by Newsdesk

Public cloud revenue

SaaS and IaaS drive growth, big players dominate…

Market watcher Gartner has released new figures which show strong growth for worldwide public cloud services. The researcher said the market is projected to expand in dollar terms by 18.5 percent in 2017 to total US$260.2 billion, up from US$219.6 billion in 2016 – and it noted that just 10 vendors command the lion’s share.

“Final data for 2016 shows that software as a service (SaaS) revenue was far greater in 2016 than expected, reaching US$48.2 billion,” said Sid Nag, Gartner research director in a statement. “SaaS is also growing faster in 2017 than previously forecast, leading to a significant uplift in the entire public cloud revenue forecast.”

SaaS revenue is expected to grow 21 percent in 2017 to reach US$58.6 billion. The acceleration in SaaS adoption can be explained by providers delivering nearly all application functional extensions and add-ons as a service, the market watcher said. This appeals to users because SaaS solutions are engineered to be more purpose-built and are delivering better business outcomes than traditional software is.

“Strategic adoption of platform as a service (PaaS) offerings is also outperforming previous expectations, as enterprise-scale organisations are increasingly confident that PaaS will be their primary form of application development platform in the future,” said Nag. “This accounts for the remainder of the increase in this iteration of Gartner’s public cloud services revenue forecast.”

The highest revenue growth will come from cloud system infrastructure services – that is, infrastructure as a service (IaaS), projected to grow 36.6 percent in 2017 to reach $34.7 billion.

Table 1. Worldwide Public Cloud Services Revenue Forecast (Billions of USD)

  2016 2017 2018 2019 2020
Cloud Business Process Services (BPaaS) 39.6 42.2 45.8 49.5 53.6
Cloud Application Infrastructure Services (PaaS) 9.0 11.4 14.2 17.3 20.8
Cloud Application Services (SaaS) 48.2 58.6 71.2 84.8 99.7
Cloud Management and Security Services 7.1 8.7 10.3 12.0 13.9
Cloud System Infrastructure Services (IaaS) 25.4 34.7 45.8 58.4 72.4
Cloud Advertising 90.3 104.5 118.5 133.6 151.1
Total Market 219.6 260.2 305.8 355.6 411.4

Source: Gartner (October 2017)

Although public cloud revenue is growing faster than initially forecast, Gartner said it still expects growth to even out from 2018 onwards. This stabilisation reflects the increasingly mainstream status and maturity that public cloud services will gain within a wider IT spending mix.

“As of 2016, approximately 17 percent of the total market revenue for infrastructure, middleware, application and business process services had shifted to cloud,” said Nag. “Through 2021, this will increase to approximately 28 percent.”

In terms of vendor share, Gartner expects 70 percent of public cloud services revenue to be dominated by the top 10 public cloud providers through 2021. “In the IaaS segment, Amazon, Microsoft and Alibaba have already taken strong positions in the market,” said Nag. “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.”

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