Gartner forecasts worldwide public cloud services revenue to reach $260 billion in 2017

Via Gartner Newsroom

Oct 12, 2017

STAMFORD, Conn., October 12, 2017

Strong SaaS and IaaS Performance Is Driving Growth in 2017

The worldwide public cloud services market revenue is projected to grow 18.5 percent in 2017 to total $260.2 billion, up from $219.6 billion in 2016, according to Gartner, Inc.

"Final data for 2016 shows that software as a service (SaaS) revenue was far greater in 2016 than expected, reaching $48.2 billion," 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."

SaaS revenue is expected to grow 21 percent in 2017 to reach $58.6 billion (see Table 1.) The acceleration in SaaS adoption can be explained by providers delivering nearly all application functional extensions and add-ons as a service. 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 organizations are increasingly confident that PaaS will be their primary form of application development platform in the future," said Mr. 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 (infrastructure as a service [IaaS]), which is projected to grow 36.6 percent in 2017 to reach $34.7 billion.

Table 1. Worldwide Public Cloud Services Revenue Forecast (Billions of U.S. Dollars)

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 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 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 more strongly than initially forecast, Gartner still expects growth even out from 2018 onwards. This stabilization 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 Mr. 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 Mr. 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."

Gartner clients can read more in the reports: "Forecast Analysis: Public Cloud Services, Worldwide, 2Q17 Update" and "Forecast: Public Cloud Services, Worldwide, 2015-2021, 2Q17 Update." Complimentary research and webinars are available at the Gartner Cloud Hub.

Gartner analysts will provide additional analysis on data center and IT operations trends at the Gartner Global Infrastructure & Operations events November 27-28, 2017 in London, December 4-7, 2017 in Las Vegas and May 15-17, 2018 in Orlando. Follow news and updates from these events on Twitter using #GartnerIO.

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