Gartner is predicting the worldwide public cloud services market will grow from $182.4B in 2018 to $214.3B in 2019, a 17.5% jump in just a year. Photo credit: Getty
Gartner predicts the worldwide public cloud service market will grow from $182.4B in 2018 to $331.2B in 2022, attaining a compound annual growth rate (CAGR) of 12.6%.
Spending on Infrastructure-as-a-Service (IaaS) is predicted to increase from $30.5B in 2018 to $38.9B in 2019, growing 27.5% in a year.
Platform-as-a-Service (PaaS) spending is predicted to grow from $15.6B in 2018 to $19B in 2019, growing 21.8% in a year.
Business Intelligence, Supply Chain Management, Project and Portfolio Management and Enterprise Resource Planning (ERP) will see the fastest growth in end-user spending on SaaS applications through 2022.
Gartner’s annual forecast of worldwide public cloud service revenue was published last week, and it includes many interesting insights into how the research firm sees the current and future landscape of public cloud computing. Gartner is predicting the worldwide public cloud services market will grow from $182.4B in 2018 to $214.3B in 2019, a 17.5% jump in just a year. By the end of 2019, more than 30% of technology providers’ new software investments will shift from cloud-first to cloud-only, further reducing license-based software spending and increasing subscription-based cloud revenue.
The following graphic compares worldwide public cloud service revenue by segment from 2018 to 2022. Please click on the graphic to expand for easier reading.
Comparing Compound Annual Growth Rates (CAGRs) of worldwide public cloud service revenue segments from 2018 to 2022 reflects IaaS’ anticipated rapid growth. Please click on the graphic to expand for easier reading.
Business Intelligence, Supply Chain Management, Project and Portfolio Management and Enterprise Resource Planning (ERP) will see the fastest growth in end-user spending on SaaS applications through 2022. Gartner is predicting end-user spending on Business Intelligence SaaS applications will grow by 23.3% between 2017 and 2022. Spending on SaaS-based Supply Chain Management applications will grow by 21.2% between 2017 and 2022. Project and Portfolio Management SaaS-based applications will grow by 20.9% between 2017 and 2022. End-user spending on SaaS ERP systems will grow by 19.2% between 2017 and 2022.
83% Of Enterprise Workloads Will Be In The Cloud By 2020. LogicMonitor’s survey is predicting that 41% of enterprise workloads will be run on public cloud platforms (Amazon AWS, Google Cloud Platform, IBM Cloud, Microsoft Azure and others) by 2020. An additional 20% are predicted to be private-cloud-based followed by another 22% running on hybrid cloud platforms by 2020. On-premise workloads are predicted to shrink from 37% today to 27% of all workloads by 2020.
Digitally transforming enterprises (63%) is the leading factor driving greater public cloud engagement or adoption followed by the pursuit of IT agility (62%). LogicMonitor’s survey found that the many challenges enterprises face in digitally transforming their business models are the leading contributing factor to cloud computing adoption. Attaining IT agility (62%), excelling at DevOps (58%), mobility (55%), Artificial Intelligence (AI) and Machine Learning (50%) and the Internet of Things (IoT) adoption (45%) are the top six factors driving cloud adoption today. Artifical Intelligence (AI) and Machine Learning are predicted to be the leading factors driving greater cloud computing adoption by 2020.
66% of IT professionals say security is their greatest concern in adopting an enterprise cloud computing strategy. Cloud platform and service providers will go on a buying spree in 2018 to strengthen and harden their platforms in this area. Verizon (NYSE:VZ) acquiring Niddel this week is just the beginning. Niddel’s Magnet software is a machine learning-based threat-hunting system that will be integrated into Verizon’s enterprise-class cloud services and systems. Additional concerns include attaining governance and compliance goals on cloud-based platforms (60%), overcoming the challenges of having staff that lacks cloud experience (58%), Privacy (57%) and vendor lock-in (47%).
Just 27% of respondents predict that by 2022, 95% of all workloads will run in the cloud. One in five respondents believes it will take ten years to reach that level of workload migration. 13% of respondents don’t see this level of workload shift ever occurring. Based on conversations with CIOs and CEOs in manufacturing and financial services industries there will be a mix of workloads between on-premise and cloud for the foreseeable future. C-level executives evaluate shifting workloads based on each systems’ contribution to new business models, cost, and revenue goals in addition to accelerating time-to-market.
Microsoft Azure and Google Cloud Platform are predicted to gain market share versus Amazon AWS in the next three years, with AWS staying the clear market leader. The study found 42% of respondents are predicting Microsoft Azure will gain more market share by 2020. Google Cloud Platform is predicted to also gain ground according to 35% of the respondent base. AWS is predicted to extend its market dominance with 52% market share by 2020.
Defining Cloud-Enabling Technologies (CET) as those that are installed, delivered and consumed on-premises, Market Monitor a service of 451 Research recently released their annual forecast of virtualization, security and automation and management revenue through 2016. The report, Market Monitor Cloud-Enabling Technologies has taken a bottoms-up approach in defining the three primary categories they include in their definition of cloud-enabling technologies. Market Monitor’s methodology is explained in the report’s summary here.
Here are the key take-aways from this report:
Cloud-Enabling Technologies defined as virtualization, security and automation and management global revenues will grow from $10.6B in 2012 to $22.6B in 2016, attaining a 21% Compound Annual Growth Rate (CAGR).
Cloud-as-a-Service revenues will grow from $5.7B in 2012 to $19.5B in 2016, attaining a 36% CAGR. Market Monitor defines Cloud-as-a-Service as externally delivered services, specifically 3rd party, that are hosted and pay-as-you-go with the cloud being relied on as a service delivery and consumption model. The following graphic provides a comparison of Cloud-as-a-Service and Cloud-Enabling Technologies revenue forecasts by year from 2012 through 2016.
451 Research forecasts that the majority of CET revenues will be from virtualization-based systems and services (66%). This segment is projected to attain a 16% CAGR in the forecast period and serve as the foundation of Phase I CET Adoption shown in the following graphic. Phase 2 of CET Adoption is projected to be dominated by the need for tools to manage and control virtualized environments. Phase 3 is projected to signal a shift to internal IT resources and internal IT cloud service providers.
The economics of public cloud computing are accelerating the pace of change occurring in enterprise software today.
Many of the scenarios that Clayton Christensen insightfully describes in The Innovator’s Dilemma are playing out right now in many sectors of this industry, shifting the balance of purchasing power to line-of-business leaders away from IT. True to the cases shown in the book, new entrants are bringing disruptive innovations that are being successfully used to attack the most price-sensitive areas of the market. Winning customers at the low-end and making their way up-market, new entrants are changing the customer experience, economics and structure of the industry. Salesforce.com is a prime example of how the insights shared in The Innovator’s Dilemma are alive and well in the CRM market for example. This is an excellent book to add to your summer reading list.
Defining The Public Cloud
The National Institute of Standards and Technology (NIST) have defined the public cloud in their latest definition of cloud computing in their September, 2011 brief you can download here (The NIST Definition of Cloud Computing). The NIST defines public cloud as “the cloud infrastructure is provisioned for open use by the general public. It may be owned, managed, and operated by a business, academic, or government organization, or some combination of them. It exists on the premises of the cloud provider.” In addition the NIST defines three models including Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Gartner’s definition of public cloud computing is comparable yet includes Business Process as a Service (BPaaS) and Cloud Management and Security.
A quick check of the term public cloud on Google Insights shows the rapid ascent of interest in this area. A graphic from Google Insights is shown below:
Public Cloud Adoption in the Enterprise
In the many conversations I’ve had with CIOs and CEOs of manufacturing companies the role of cloud computing comes up often. There’s a very clear difference in the thinking of CIOs who see their jobs as selectively applying technologies to strategic needs versus those who are focused on compliance and risk aversion. The former see their enterprises moving to public and hybrid clouds quickly to better integrate with dealers, distributors and suppliers at a strategic level.
The public cloud’s pervasiveness in the enterprise is growing rapidly. This market dynamic is reflected in the report, Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update (ID:G00234814). Gartner breaks out forecasts into the areas of Cloud Business Process Services/Business Process as a Service (BPaaS), Application Services/Software as a Service (SaaS), Application Infrastructure Services/Platform as a Service (PaaS), System Infrastructure Services/Infrastructure as a Service (IaaS) and Cloud Management and Security Services. Highlights from the report are presented in the following five areas:
Cloud Business Process Services/Business Process as a Service (BPaaS)
Gartner is predicting that BPaaS will grow from $84.1B in 2012 to $144.7B in 2016, generating a global compound annual growth rate of 15%.
Of the eight subsegments Gartner is tracking in their BPaaS forecast, Cloud Payments (17.8%) Cloud Advertising (17.1%) and Industry Operations (15.1%) are expected to have the greatest compound annual growth rates (CAGR) in revenues generated by 2016.
In terms of revenue generated, Cloud Advertising is projected to grow from $43.1B in 2011 to $95B in 2016, generating 17.1% CAGR in revenue growth through 2016.
Cloud Payments are forecast to grow from $4.7B in 2011 to $10.6B in 2016, generating a CAGR of 17.8% worldwide.
E-Commerce Enablement using BPaaS-based platforms is expected to grow from $4.7B in 2011 to $9B in 2016, generating a 13.6% CAGR in revenue globally.
Application Services/Software as a Service (SaaS)
SaaS-based applications are expected to grow from $11.8B in 2012 to $26.5B in 2016, generating a CAGR of 17.4% globally. Gartner tracks ten different categories of SaaS applications in this latest forecast with CRM, ERP, and Web Conferencing, Teaming Platforms, and Social Software Suites being the three largest in terms of global revenue growth.
The three fastest-growing SaaS areas include Office Suites (40.7%), Digital Content Creation (32.2%) and Business Intelligence applications (27.1%) having the highest CAGRs from 2011 through 2016.
SaaS-based CRM will see the largest global revenue growth of all categories, increasing from $3.9B in 2011 to $7.9B in 2016, achieving a 15.1% CAGR worldwide.
Web Conferencing, Teaming Platforms, and Social Software Suites will grow from $2B in 2011 to $3.4B in 2016, generating an 11.2% CAGR. Gartner is including Enterprise 2.0 applications in this category.
SaaS-based ERP is forecasted to grow from $1.9B in 2011 to $4.3B in 2016, achieving a 17.3% CAGR.
Supply Chain Management (SCM) is an area that Forrester, Gartner, IDC and others have predicted significant growth in. Gartner’s latest forecast for SaaS-based SCM is $1.2B spent in 2011 growing to $3.3B in 2016, representing a 21.1% CAGR.
Application Infrastructure Services/Platform as a Service (PaaS)
Gartner forecasts the worldwide enterprise market for PaaS platforms will grow from $900M spent in 2011 to $2.9B in 2016, representing a 26.6% CAGR.
Growth rates by PaaS subsegment include the following: Application Development (22%), Database Management Systems (48.5%), Business Intelligence Platform (38.9%) and Application Infrastructure and Middleware (26.5%).
Application Infrastructure and Middleware is expected to be the largest revenue source in PaaS for the next four years. Gartner reports this subsegment generated $649M in 2011, projected to grow to $2.1B in 2016, generating $1.5B in revenue and a 26.5% CAGR.
System Infrastructure Services/Infrastructure as a Service (IaaS)
With a projected CAGR of 41.7%, this segment is the fastest growing of the five Gartner included in their public cloud forecast. From $4.2B in revenue generated in 2011 to $24.4B in 2016, IaaS is expected to grow by just over $20B in the forecast period globally.
CAGR by IaaS segment from 2001 to 2016 include Compute (43.2%), Storage (36.6%) and Print (16%).
The Compute subsegment is expected to see the greatest revenue growth globally, growing from $3.3B in 2011 to $20.2B in 2016, generating a 43.2% CAGR.
Cloud Management and Security Services
Comprised of Security, IT Operations Management and Storage Management, Cloud Management and Security Services generated $2.3B in 2011 with a forecast of $7.9B in 2016, generating a 27.2% CAGR.
IT Operations Management (38.2%), Storage Management (30.6%) and Security (23.7%) each have relatively high CAGRs through 2016.
Bottom line: Of the five areas Gartner includes in their forecast, BPaaS and its subsegments show trending towards greater support for enterprise-wide transaction and e-commerce management. With 76% of the entire 2012 public cloud forecast being in the BPaaS segment, it is clear Gartner is seeing strong interest on the part of enterprise clients to spend in this area.