Cloud computing services grow 19% in Q1 2018

In Q1 2018 cloud services (IaaS, PaaS and SaaS) revenues grew by 19% to $48b, net profit grew by 7% to $5.7b and the total headcount of those providing them rose 8% to 544k. In the year to the end of March revenues grew 26% to $195b, while net profits declined 11% to $20b.

There are major differences between Software as a Service and the other classes; it is almost a ‘no brainer’ for software companies to offer subscriptions to their products via the Internet. This market grew by 14% in the quarter (to $26b) and by 27% in the year to $109b. For the year SaaS accounted for 11% of total the revenues, 9% of the net profit and 10% of the employment of the total software market.

Infrastructure as a Service was the second largest category, growing 21% in the quarter to $14b (and by 24% in the year to $56b). Platform as a Services had the strongest revenue growth of the three categories – 29% in both in the quarter to $8.1b and in the year to $30.0b. Enterprise customers use PaaS and IaaS to build corporate applications which in previous times would have resided in their own data centre.

I show the annual market hares in the Figure. It shows that Salesforce.com still holds the lead in the SaaS market, followed by Microsoft. Many of the leaders here are of widely used enterprise applications, such as IBM, Oracle, SAP and CA. The largest gaming software companies Electronic Arts and Activision are also featured as major suppliers.

In the IaaS and PaaS markets Amazon and IBM were the joint leaders, achieving market shares of 19.8% and 19.5% respectively. The other major vendors have much smaller shares – Microsoft (5.7%), Google (4.6%) and NTT Data (4.0%) were in positions 3, 4 and 5.

My forecast (shown in this Figure) by region suggests that the Americas (and most importantly the US, which is roughly 80% of the market) will retain its lead in adoption above EMEA and Asia Pacific.

I expect total cloud services revenues to grow significantly – they should reach $280b in 2020, with similar splits between the 3 constituent sub-markets as we have now. Despite this we are entering an interesting period with many large organisations choosing to build their own private clouds, or using their favourite vendors to integrate their internal IT operations with cloud services in hybrid configurations. In the process we’re seeing a rise in the success of local and regional cloud services suppliers who are more attuned to the practical needs of their customers.