Cloud Computing

Global cloud services market to surpass USD 68 billion in 2010

InformationWeek News Network, June 22, 2010

Research firm Gartner predicts that global cloud services revenues will register a 16 percent increase in 2010 as compared to 2009

Worldwide cloud services revenue is forecast to reach USD 68.3 billion in 2010, a 16.6 percent increase from 2009 revenue of USD 58.6 billion, according to Gartner. The industry is poised for strong growth through 2014, when worldwide cloud services revenue is projected to reach USD 148.8 billion.

"We are seeing an acceleration of adoption of cloud computing and cloud services among enterprises and an explosion of supply-side activity as technology providers maneuver to exploit the growing commercial opportunity," said Ben Pring, research vice president at Gartner. "The scale of application deployments is growing; multi-thousand-seat deals are increasingly common. IT managers are thinking strategically about cloud service deployments; more-progressive enterprises are thinking through what their IT operations will look like in a world of increasing cloud service leverage. This was highly unusual a year ago."

Gartner estimates that, over the course of the next five years, enterprises will spend USD 112 billion cumulatively on software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS), combined.

"After many years of germination, most notably in the SaaS arena, the core ideas at the heart of cloud computing — such as pay for use, multi-tenancy and external services — appear to be resonating more strongly," Pring said. "In part, this can be explained by macroeconomic factors. The financial turbulence of the last 18 months has meant every organization has been scrutinizing every expenditure. An IT solution that can deliver functionality less expensively and with more agility (remembering that time is money) is hard to ignore against this backdrop."

More fundamentally, cloud computing has become more material, because the challenges inherent in managing technology based on the principles of previous eras — complex, custom, expensive solutions managed by large in-house IT teams — have become greater, and the benefits of cloud computing in addressing these challenges have matured to become more appropriate and attractive to all types of enterprises.

The US share of the worldwide cloud services market was 60 percent in 2009 and will be 58 percent in 2010, but by 2014, this will be diluted to 50 percent as other countries and regions begin to adopt cloud services in more-significant volumes. Western Europe is expected to account for 23.8 percent of the cloud services market in 2010, and Japan will represent 10 percent. In 2014, the UK is forecast to account for 29 percent of the market, while Japan will represent 12 percent of cloud services revenue.

"We have not seen any evidence yet to support the often-touted hypothesis that smaller and developing countries will "leapfrog" Western markets — and come to represent a large proportion of the overall worldwide market — through their adoption of the Internet and cloud services," Pring said.

In industry terms, the financial services and manufacturing industries are the largest early adopters of cloud services. Communications and high-tech industries are also leveraging the cloud in significant volume, while the public sector is also clearly interested in the potential of cloud services and its share of the overall market.

However, Pring said that, although interest in cloud computing has grown, many enterprises still have strong concerns about the idea of cloud computing and cloud-computing products as well as cloud services. Security is primary among these, while other concerns include availability of service, vendor viability and maturity.

"Many enterprises may be examining cloud computing and cloud services, but are far from convinced that it is appropriate for their requirements," he said. "We expect that this will be a significant opportunity for existing IT services players to evolve their current offerings — such as outsourcing, system integration, development, etc. — to become cloud-enabled and try to combine the best of the two worlds, namely traditional IT services and cloud computing."

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