Gartner forecasts that public cloud end user spending will reach nearly $600 billion by the end of 2023. The market research firm says public cloud services will continue in 2022, and nearly capture $494.7 billion in global spending this year – up from $410.9 billion in 2021. That represents a 20.4% increase in spending from 2021.
“Cloud is the powerhouse that drives today’s digital organizations,” said Sid Nag, research vice president at Gartner. “CIOs are beyond the era of irrational exuberance of procuring cloud services and are being thoughtful in their choice of public cloud providers to drive specific, desired business and technology outcomes in their digital transformation journey.”
Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2022 at 30.6%, followed by desktop-as-a-service (DaaS) at 26.6% and platform-as-a-service (PaaS) at 26.1% (see Table 1). The new reality of hybrid work is prompting organizations to move away from powering their workforce with traditional client computing solutions, such as desktops and other physical in-office tools, and toward DaaS, which is driving spending to reach $2.6 billion in 2022. Demand for cloud-native capabilities by end-users accounts for PaaS growing to $109.6 billion in spending.
Table 1. Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)
|Cloud Business Process Services (BPaaS)||51,410||55,598||60,619|
|Cloud Application Infrastructure Services (PaaS)||86,943||109,623||136,404|
|Cloud Application Services (SaaS)||152,184||176,622||208,080|
|Cloud Management and Security Services||26,665||30,471||35,218|
|Cloud System Infrastructure Services (IaaS)||91,642||119,717||156,276|
|Desktop as a Service (DaaS)||2,072||2,623||3,244|
BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service. Note: Totals may not add up due to rounding. Source: Gartner (April 2022)
“Cloud native capabilities such as containerization, database platform-as-a-service (dbPaaS) and artificial intelligence/machine learning contain richer features than commoditized compute such as IaaS or network-as-a-service,” said Nag. “As a result, they are generally more expensive which is fueling spending growth.”
SaaS remains the largest public cloud services market segment, forecasted to reach $176.6 billion in end-user spending in 2022. Gartner expects steady growth within this segment as enterprises take multiple routes to market with SaaS, for example via cloud marketplaces, and continue to break up larger, monolithic applications into composable parts for more efficient DevOps processes.
Emerging technologies in cloud computing such as hyperscale edge computing and secure access service edge (SASE) are disrupting adjacent markets and forming new product categories, creating additional revenue streams for public cloud providers.
“Driven by maturation of core cloud services, the focus of differentiation is gradually shifting to capabilities that can disrupt digital businesses and operations in enterprises directly,” said Nag. “Public cloud services have become so integral that providers are now forced to address social and political challenges, such as sustainability and data sovereignty.
“IT leaders who view the cloud as an enabler rather than an end state will be most successful in their digital transformational journeys,” said Nag. “The organizations combining cloud with other adjacent, emerging technologies will fare even better.”
Gartner clients can read more in Forecast: Public Cloud Services, Worldwide, 2020-2026, 1Q22 Update. Lean more in the complimentary Gartner webinar Cloud Computing Scenario: The Future of Cloud.
Enterprise IT spending on public cloud computing, within addressable market segments, will overtake spending on traditional IT in 2025, according to Gartner, Inc.
Gartner’s ‘cloud shift’ research includes only those enterprise IT categories that can transition to cloud, within the application software, infrastructure software, business process services and system infrastructure markets. By 2025, 51% of IT spending in these four categories will have shifted from traditional solutions to the public cloud, compared to 41% in 2022. Almost two-thirds (65.9%) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.
“The shift to the cloud has only accelerated over the past two years due to COVID-19, as organizations responded to a new business and social dynamic,” said Michael Warrilow, research vice president at Gartner. “Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.”
In 2022, traditional offerings will constitute 58.7% of the addressable revenue (see Figure 1), but growth in traditional markets will be much lower than cloud. Demand for integration capabilities, agile work processes and composable architecture will drive continued shift to the cloud, as long-term digital transformation and modernization initiatives are brought forward to 2022. Technology product managers should use the cloud shift as measure of market opportunity.
In 2022, more than $1.3 trillion in enterprise IT spending is at stake from the shift to cloud, growing to almost $1.8 trillion in 2025, according to Gartner. Ongoing disruption to IT markets by cloud will be amplified by the introduction of new technologies, including distributed cloud. Many will further blur the lines between traditional and cloud offerings.
Enterprise adoption of distributed cloud has the potential to further accelerate cloud shift because it brings public cloud services into domains that have primarily been non-cloud, expanding the addressable market. Organizations are evaluating it because of its ability to meet location-specific requirements, such as data sovereignty, low-latency and network bandwidth.
To capitalize on the shift to cloud, Gartner recommends technology and services providers target segments where the shift is occurring most aggressively, in addition to seeking new high-growth cloud opportunities. For example, infrastructure-related segments have a lower level of cloud penetration and are expected to grow faster than segments such as enterprise applications that are already highly penetrated. Providers should also target specific personas, adoption profiles and use cases with go-to-market initiatives.
*Note to editors: Gartner’s research on cloud shift provides a high-level view of the market impact of cloud computing by measuring the ratio of enterprise IT spending on public cloud services compared with traditional (non-cloud) for a given set of market segments. It compares only those markets where cloud is a meaningful trend that can be exploited by technology providers. It excludes consumer spending and markets that cannot transition to cloud, for example, mobile devices.
More detailed analysis is available to Gartner clients in the report “Market Impact: Cloud Shift — 2022 Through 2025.” More information on cloud trends is available in the Gartner webinar “The Gartner Hype Cycle for Cloud Computing.”
Telcos Move to Public Cloud:
Dish Network is perhaps the poster child for this shift, with its ambitious plan to deploy its greenfield 5G network on Amazon Web Services (AWS). After a few delays, the big switch-on is expected to begin this year. Similarly, AT&T struck a deal last June to migrate its 5G network onto Microsoft Azure. Verizon is also using Azure, in this case to underpin its private mobile edge cloud service. North of that particular border, Bell Canada in July inked a deal to migrate various critical workloads – including IT, network functions and applications – to Google Cloud. It came less than two months after Bell teamed up with AWS to overhaul its business and consumer applications, as well as offer AWS-powered multi-access edge computing (MEC) services.
More recently, Telenor expanded its partnership with Amazon to jointly offer 5G and edge services to various industry verticals. In short, more and more telcos are coming to the conclusion that hyperscale public cloud offers a ready-made route for them, not just to address the enterprise IT market, but to also make their own networks cloud native.