SaaS Drives Public Cloud Service Market Growth

According to a recent report from Gartner, the global public cloud service market is expected to skyrocket to $186.4 billion by the end of the year, reflecting a 21.4% jump as enterprises up spending on software-as-a-service deployments.

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SaaS remains the biggest division of the overall cloud market, as the research firm foresees the segment’s sales growing 22.2% to reach $73.6 billion over the next 12 months. SaaS is expected to make up 45% of total application software spending by 2021.

“In many areas, SaaS has become the preferred delivery model,” stated Gartner research director Sid Nag. “Now SaaS users are increasingly demanding more purpose-built offerings engineered to deliver specific business outcomes.”

Gartner found the fastest growing segment in the public cloud service market to be cloud system infrastructure services (infrastructure-as-a-service or IaaS), expected to boom 35.9% this year to reach $40.8 billion. The research firm foresees the top 10 IaaS companies comprising a whopping 70% of the IaaS market by 2021, a sharp increase from 50% in 2016.

“The increasing dominance of the hyperscale IaaS providers creates both enormous opportunities and challenges for end users and other market participants,” said Mr. Nag.

While public cloud revenue is growing at a higher rate than expected, Gartner foresees growth stabilizing from 2018 onward.

Another report from research firm IDC forecasts the public cloud services market to achieve a five-year compound annual growth rate (CAGR) of 21.9% over the 2016-2021 period, as spending totals $277 billion in 2021.

"The industries that are spending the most – discrete manufacturing, professional services, and banking – are the ones that have come to recognize the tremendous benefits that can be gained from public cloud services. Organizations within these industries are leveraging public cloud services to quickly develop and launch 3rd Platform solutions, such as big data and analytics and the Internet of Things (IoT), that will enhance and optimize the customer's journey and lower operational costs," said Eileen Smith, IDC program director of Customer Insights & Analysis.

The IDC also highlighted SaaS as the largest cloud computing category, accounting for nearly two-thirds of all public cloud spending in 2018, which it sees reaching $160 billion. The research firm wrote that SaaS spending will be dominated by application purchases, while enterprise resource management (ERM) applications and customer relationship management (CRM) applications will gain the most from the spending trend this year.