Cloud services $246 billion and still growing at 25%

Cloud computing services continue to grow apace (see my Figure above for the quarterly size of the market by type since 2005). In the year to the end of June spending grew by 25% to $246b and in the quarter, by 39% to $72.4b.SaaS was the largest of the three offerings, growing by 43% in the year to $40.2b, followed by IaaS (40% to $21.1b) and then PaaS (25% to $11.1b). Cloud services are also very profitable for their suppliers; overall net profit in the year to the end of June was 17.8% of revenues for the total cloud services market.

While a few of the large vendors are experiencing a decline in growth rates (IBM in particular), AWS, Azure and Google cloud are still growing strongly, while smaller regional or country suppliers are launching new services (such as VPNs and private cloud connections to on premise and public cloud services).

• Microsoft was the leader of the cloud computing market due to its SaaS (such as Office 360) and its growing Azure IaaS and PaaS services. It held an 11.7% market share of all services in the year to the end of June (see my Figure above).
• It was closely followed by Amazon Web Services, which achieved a 10.8% share of the total market based on its leadership of both the IaaS (a market share of 20.7%) and PaaS (28.8%) markets.
• IBM was in third position overall (with a market share of 9.9%) – it straddles all three markets and was placed third in SaaS with a 3.9% (behind Microsoft and Salesforce) and second in both IaaS with a 15.7% share and PaaS (19.2%).
• Salesforce‘s fourth position was based mainly on its SaaS strength, where it is now in second place behind Microsoft with a 14.4% share. It is now posting profits most quarters following its set phase in which it accumulated substantial losses.
• Google Cloud is on the rise – achieving a 3.2% of the overall market with its IaaS services – it was placed third in that market.

At a regional level the American leaders of the overall market were Amazon, Salesforce, Microsoft and IBM (in order). In Asia Pacific it was Microsoft, IBM, Alibaba and Baidu) and in EMEA, Microsoft, IBM, Amazon and Salesforce. while the strongest indigenous suppliers were France Telecom (10th) and OVH (13th).

America – and especially the US – continues to be the region of fastest and strongest adoption of cloud services, while Asia Pacific currently remains behind both the Americas and EMEA. Eventually it is possible that EMEA or Asia Pacific might take the lead, but it is more likely that the term ‘cloud’ will disappear beforehand. Unless new nationalism and strong security and privacy regimes force us to back down from letting businesses utilize cloud services, I think there will come a time when every offering from computer suppliers is available as a service delivered over private connections, the Internet, MPLS or SD WAN.

Multi and hybrid cloud approaches are maturing fast to overcome the trouble many large organizations have in integrated their new found services from AWS, Azure, IBM cloud, Google, etc. with their on premise and traditional hosed IT infrastructures. Hardly surprisingly the new comers (especially Amazon) are less interested in multi and hybrid cloud strategies as their financial success has not been limited in the past from the differences in their services underlying technology; suppliers such as Microsoft, IBM and Oracle are much more interested as they balance the cloud against their pre-existing offerings. Above I’ve included a chart borrowed from IBM, which shows the various interactions need to adopt hybrid cloud solutions. The basis of cloud services is quickly changing from applications running on virtual machines to those running in containers (typically Docker ones managed by Kubernetes); this is accelerating adoption as many enterprises lack the resources and enthusiasm to embrace containers internally, having spent so much time and money mastering virtualization based on hypervisors such as VMware’s.

At ITCandor we continue to size, analyse and forecast all aspects of the cloud computer market. Please contact us if you’d like to know more.

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