Cloud computing spending is growing even faster than expected

Most new features are being offered by vendors as cloud services only.
Written by Steve Ranger, Global News Director

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Spending on cloud computing services is growing faster then previously expected, with software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) two of the most rapidly expanding segments.

Worldwide public cloud services revenues are expected to grow 18.5 per cent in 2017 to a total $260bn, up from $219.6bn last year, according to Gartner.

While that's still a small element of total worldwide IT spending -- which stands somewhere around $3.5tn -- it's a significant number when compared to worldwide enterprise software spending and is expected to reach $351bn.

In particular the use of software as a service is rising more rapidly than previously predicted, said Sid Nag, research director at Gartner. "SaaS is also growing faster in 2017 than previously forecast, leading to a significant uplift in the entire public cloud revenue forecast."

Image: Gartner

SaaS revenue is expected to grow 21 per cent in 2017 to reach $58.6bn. But how much of that is because companies want to use cloud, and how much of that is because that is what businesses are now being offered by vendors (which are keen to move to away from selling one-off licences to selling potentially more lucrative cloud subscriptions) is somewhat unclear.

Gartner said the acceleration in SaaS adoption is the result of a shift by software vendors to providing nearly all new application functionality or add-ons as a service, but added: "This appeals to users because SaaS solutions are engineered to be more purpose-built and are delivering better business outcomes than traditional software is."

Adoption of platform-as-a-service (PaaS) is also rising faster than the analysts had predicted, Nag said, as large companies are becoming increasingly confident that PaaS will be their primary form of application development platform in the future. "This accounts for the remainder of the increase in this iteration of Gartner's public cloud services revenue forecast."

However, the highest revenue growth will come from IaaS, which is projected to grow 36.6 per cent in 2017 to reach $34.7 billion.

The analysts said growth will stabilise from 2018 onwards, as cloud computing becomes part of the mainstream IT spending mix.

"As of 2016, approximately 17 per cent 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 per cent."


Two-thirds of the spending on cloud computing services will go through the top 10 public cloud providers.

Image: Getty Images/iStockphoto

Big players will dominate the delivery of cloud services. Gartner said two thirds of the spending on cloud computing services will go through 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, licence-based software to cloud subscription models."

However, there are still barriers to the adoption of cloud services. A separate survey by Oracle found that nearly half of the respondents said negative preconceptions have been a strong barrier to IaaS adoption within their organization.

It also found that only just under half of businesses thought IaaS provides world-class availability, uptime and speed; and more recent adopters were less likely to be impressed by its benefits than longer-term users. It also found that a significant minority -- 45 percent -- of experienced cloud users believe upfront migration costs ultimately outweigh the long-term savings created by IaaS--higher than the proportion of recent users who feel the same.

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