The first phase of a shift to the public cloud is almost over, according to an IDC study, but more cloud growth is still to come as more companies move to the public cloud for increased innovation instead of just cost-cutting solutions.
IDC estimates public cloud services to be worth $47.4 billion in 2013 and expects that number to jump to more than $107 billion in 2017. The compound annual growth rate (CAGR) will be five times the industry as a whole at an estimated 23.5 percent. The study did not consider revenue from dedicated private cloud deployments.
The growth is expected to be user- and solution-driven as customers experience growing commoditization and competition in the marketplace. The variety of deployment options makes the transition an easy one, the study said, which allows more companies to make the switch to cloud.
"Over the next several years, the primary driver for cloud adoption will shift from economics to innovation as leading-edge companies invest in cloud services as the foundation for new competitive offerings. The emergence of cloud as the core for new 'business as a service' offerings will accelerate cloud adoption and dramatically raise the cloud model's strategic value beyond CIOs to [executives] of all types," said Frank Gens, senior vice president and chief analyst at IDC, in a statement.
While software as a service is expected to remain the largest player in IT spending, getting an estimated 59.7 percent of revenues in 2017, the switch to public cloud is expected to grow, driving 17 percent of IT revenues. The growth is expected to be seen across many different platforms, driving half of the growth across applications, system infrastructure software, platform as a service and basic storage, the study said.
Karl Bickmore, owner of Phoenix-based CCNS Consulting, said that he sees the same transition in his own business as more of his customers are moving to the cloud for strategic reasons rather than strictly cost-cutting.
"In my opinion, that's a much better way to characterize the benefits of the cloud today," Bickmore said.
Bickmore said that a lot of the reason for the switch is that the customer doesn't always save money if they fully transition to the cloud, though he said the growth they see from adopting it often outweighs the extra cost.
"In the long run, it's a really good deal," Bickmore said, for both IT companies and their customers.
The study said that IT companies should keep an eye on the global market, as it expects the United States to lose market share as Europe, Asia and South America step up. The U.S. is expected to drop from holding 56.9 percent of the market this year to 43.9 percent in 2017.
"In this second phase of cloud development, it will be essential for cloud services providers to reexamine their cloud strategies, preparing for a marketplace focused intensely on business innovation, industry transformation, and increasingly pressured pricing and operating models," Gens said in a statement. "How suppliers navigate the next two years will tell us a lot about who the IT market leaders will be for the next two decades."
PUBLISHED SEPT. 5, 2013