The report predicts that by the end of 2020, the global cloud IT market revenues will more than double with both private and public cloud software, hardware and services generating a whopping $390 billion in revenues.
According to the report by Bain & Company, global cloud IT market revenues were ‘only’ $180bn in the year 2015, but they are now expected to increase at a compound annual growth rate (CAGR) of 17% until the year 2020. The $180bn figure represented 16% of the $1.1 trillion enterprise IT industry. According to the report, during the three years period from 2012 to 2015, cloud demand has accounted for 70% of related IT market growth, and it is now expected to represent 60% of growth through 2020. Hence, technology providers who fail to board on the cloud computing train run the high risk of losing out on an important source of their future growth.
Of this $390 billion estimated figure, the report predicts that public cloud services will come out representing the largest part of the sector, with SaaS, also known as Software as a Service , growing at a 18% CAGR. On the other hand, IaaS or Infrastructure as a Service and PaaS or Platform as a Service are estimated to grow at a 27% CAGR.
The report also said that while public cloud infrastructure and enabling services will witness growth at a 12% CAGR, the CAGR of private cloud infrastructure and enabling services, on the other hand, is expected to be at 15%. Further, private cloud services, including dedicated private clouds (DPC) and managed private clouds (MPC), will be growing at a 25% CAGR.
The reason for these phenomenal growth figures is the huge transformation that the industry has gone in the period of last five years. There has been a visible shift from a state of mind where cloud was just seen as a tool for start-ups and small and mid-size businesses, and security was seen as a major concern in cloud, inhibiting the large enterprises in particular from adopting cloud computing in a meaningful way. But now, the scenario has changed drastically.
In 2017, Of the Fortune Global 50 companies, 48 have publicly announced cloud adoption plans, many of which use the cloud for a broad swath of their IT environments. While security does remain a top concern, but those have largely been moderated if not fully eliminated. In fact, concerns over uncertain cost savings and loss of control have also been largely taken care of. While old concerns are largely being moderated or taken care of, the field has seen the emergence of new problems regarding data portability, compliance and vendor lock-in etc. But, in spite of these challenges, profits for total cloud computing from both public and private cloud services and components are four times greater than what they were in the year 2012. Further, cloud service providers that are into selling to end customers currently command 20% of total profits, a figure which was nearly nonexistent in the year 2012.
According to the report by Bain & Company, in the period of last five years, as cloud offerings have evolved and the customer base has grown exponentially, the slow-and-steady customers have grown from the smallest-growing segment to the fastest-growing segment. As the name suggests, slow-and-steady customers are customers that for a range of reasons, not ready to adopt a new technology in a meaningful way. While they are interested in reaping the benefits of the technology, but they also want to minimize disruption and are careful in evaluating whether the benefits are worth the risks of new technology. According to the report, the slow-and-steady customers have the potential of becoming the largest segment in overall cloud spending in the next few years. In the year 2011, slow-and-steady customers had only 1% of their applications, on average, in the cloud. By 2015, this figure had grown to 16%, and it is now expected to grow to 30% by 2018. The Slow-and-steady customers will be followed by ‘safety-conscious’, ‘transformational, ‘heterogeneous’ and ‘price-conscious’ customers.
Cautioning technology providers, the report has called them to take a step back and reevaluate whether they are well-prepared for witnessing success in the next wave of cloud computing. According to Bain and Company, in order to write a success story in the next phase, technology providers need to invest to win big in a focused set of cloud battlegrounds, target the customer segments that best fit with their assets and capabilities, and finally, reassess their offers, go-to-market model, organization and people, processes, incentives and systems for the next wave of cloud computing.
Technology providers who are able to recognise and sustain these changing trends are the only ones who will finally emerge victorious in the race.