Cloud services grow 18% to reach $253 billion in 2019

I am convinced that the ITC industry can do lots to mitigate many of threats of the COVID-19 pandemic. In particular providing the platform for travel avoidance and keeping the wheels of commerce going during what may be years of the need for social/physical distancing. It will also undergo a number of accelerated changes in its make up as it did as a result of the Credit Crunch in 2008-9. In order to investigate these issues I’ve decided to publish a series of posts giving findings for the sub-markets in 2019. I’m starting with cloud services (made up of Software, Infrastructure and Platform as a Service) here – spending on which grew 18% in 2019 to reach $253 billion.
In my Figure shown above I split out the quarterly spending on SaaS, IaaS and PaaS services. Each has grown significantly. In particular:

• SaaS grew by 8% to $126 billion; despite representing almost half of the total cloud services market, it is arguably the least interessting category since there are few reasons for any software supplier not to wrap its offerings up in on-line versions. SaaS was just 11% of all the $1.1 trillion spending on all software in 2019, which grew at 6% in the year. Microsoft was the SaaS market leader with a 14% share, followed by Salesforce (12%), IBM (5%) and Oracle (3%).
• IaaS grew by 31% and PaaS by 27% in the year to reach totals $80 and $48 billion respectively. They too have a long way go as they made up just 4% and 2% respectively of the total $2.0 trillion IT services market, which grew at 7% in 2019. These categories of services are allowing many enterprise customers to build applications which in previous generations would have run exclusively in their own in-house data centers. Certain suppliers are working hard to allow their customers to develop hybrid multi-cloud operations in which they can mix internal and external IT infrastructure together, rather than having to choose between one or the other.

Cloud services were also highly profitable in 2019. In total net profit was $43 billion – 22% up on 2018.

Amazon’s was the stand-out market leader of the IaaS/PaaS market in 2019, achieving a 27.9% share (see my Figure above), followed by IBM, which held a strong second place with a 17.6% share. The other leading suppliers can be split into categories – global US-based hyperscalers (Google, Micorsoft Azure), Chinese-based (Alibaba, Baidu), enterprise sepcialists (Rackspace, NTT Data, Oracle), etc.

The strong growth in cloud service spending will inevitably be hit by the massive uncertainty of the pandemic as it was in 2008 and 2009, when it grew by just 8%. However I believe it has the potential to help the world significantly once it recedes. I’ll write more about this in later posts of course.