Public cloud services market thriving, but dominated by the big guys
The flourishing public cloud services market is being heavily influenced by the leaders as their share of the pie continues to grow.
According to the International Data Corporation (IDC), the worldwide public cloud services market grew 29 percent in 2017 to reach a total of US$117 billion. While this growth was actually lower than 2016’s effort, revenue growth of the top 16 providers by market share increased during this period.
The cumulative share of the 16 market leaders went from 47.9 percent in 2016 to 50.7 percent in 2017 to represent more than half of the all the worldwide public cloud services spending.
The majority of public cloud services revenue is still attributed to providers in the United States with 60 percent, however, this is a decrease from 62 percent in 2016 as adoption and growth in other regions increased their contribution.
Furthermore, IDC expects this trend to continue to increase over the next few years with the revenue more dispersed as new regional services and expansion by global players become increasingly strong factors in driving growth.
"2017 was a pivotal year in the expansion of public cloud service adoption, as public cloud services continued to defy the usual laws of market gravity: for the fifth straight year, spending growth remained at a scorching 29 percent, even as the size of the market has tripled over that time," says IDC chief analyst and senior vice president Frank Gens.
"2017 also saw some intriguing market share shifts among the major players, as all of them have significantly increased their focus on the cloud, and competitive pressure has ratcheted way up. The next three years will determine IT industry leadership for the next two decades and beyond."
IDC asserts the Software-as-a-Service (SaaS) segment can be summed up by supplier consolidation, maturing customer adoption, and steady growth. Enterprise Resource Management (ERM), Customer Relationship Management (CRM), and Collaboration applications contributed the most to its growth as they accounted for 64 percent of all SaaS-delivered applications.
Within the SaaS applications, Supply Chain Management (SCM) and Content represented the fastest growing categories with 27 percent and 28 percent respectively.
"The SaaS delivery model accounts for 68 percent of worldwide public cloud services revenue. SaaS applications continue to grow at a respectable 22 percent, reaching $75 billion in 2017 and forecast to reach $163 billion by 2022. In the System Infrastructure Software (SIS) category, security SaaS accounts for 42 percent of all revenue, with a five-year CAGR of 13 percent through 2022,” says IDC SaaS and Cloud research director Frank Della Rosa.
“While new SaaS companies launch regularly, technology mainstays like Salesforce, Microsoft, and Oracle remain atop the list of SaaS providers.”
Despite very encouraging expansion, year on year growth actually slowed slightly in the Platform-as-a-Service (PaaS) segment from 48 percent in 2016 to 47 percent in 2017. This accounted for a little over $17 billion revenues for the year, and IDC expects this growth to continue as awareness of new development methods expands while the barriers to public cloud adoption decrease.
"Demand for applications has continued to fuel the growth of PaaS services to improve developer productivity. Emerging technologies like containers and serverless computing are changing the delivery and consumption model of PaaS services. As more companies demonstrate value from platforms, adoption rates will remain high in the near future," says IDC Platform-as-a-Service research director Larry Carvalho.
And then finally in the Infrastructure-as-a-Service (IaaS) segment, worldwide growth of revenue was driven by enterprise adoption and growth in new regions. Like the PaaS sector, revenue grew but revenue growth itself actually slowed, from 45 percent in 2016 to 40 percent in 2017 as the market reached a total size of just under $25 billion in 2017.
"Enterprise usage of public cloud IaaS is still in its early phase. There is strong interest among enterprise IT organisations to increase use of public cloud IaaS and the major providers continue to address barriers for large scale adoption,” says IDC Public Cloud Infrastructure-as-a-Service research director Deepak Mohan.
“These factors will continue to drive workload deployments in public cloud IaaS, and the market can be expected to grow at the current rate for at least the next two years.”