Public Cloud Market to Swell to $411 Billion in 2020

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These days, it’s good to be a public cloud services company.

In a new Gartner forecast, the analyst firm predicted that the world’s public cloud services providers will generate $260.2 billion in sales this year, an 18.5-percent annual increase. By 2020, that figure is expected to jump to $411.4 billion.

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A good portion of that—nearly $100 billion—will be driven by enterprises that are increasingly entrusting their business application workloads to the public cloud.

“SaaS [software as a service] revenue is expected to grow 21 percent in 2017 to reach $58.6 billion. The acceleration in SaaS adoption can be explained by providers delivering nearly all application functional extensions and add-ons as a service,” stated Gartner. “This appeals to users because SaaS solutions are engineered to be more purpose-built and are delivering better business outcomes than traditional software is.”

public cloud market

The platform as a service (PaaS) segment is also catching on, noted Gartner research director Sid Nag. “Strategic adoption of platform as a service offerings is also outperforming previous expectations, as enterprise-scale organizations are increasingly confident that PaaS will be their primary form of application development platform in the future.”

The PaaS category is expected to rake in 11.4 billion this year, up from $9 billion in 2016. By 2020, PaaS providers will generate $20.8 billion in revenue.

In terms of sheer size, the cloud advertising segment is the largest and will remain at the top of the heap for the foreseeable future. The category will generate $104.5 billion in 2017, up from $90.3 billion last year, and balloon to $151.1 billion in 2020.

Intensifying demand for public cloud services is having a profound effect on how data center hardware and software vendors conduct business.

In September, Synergy Research observed that the data center infrastructure market had surpassed $30 billion amid a public cloud boom. In aggregate, the revenues of HPE, Dell, Cisco, original design manufacturers (ODMs) and other vendors that cater to public cloud providers, saw a 35-percent jump in the second quarter of 2017 compared to the same period in 2015.

In light of this, it’s only natural that demand for traditional data center solutions is slipping.

“Spending on hardware and software used to build public cloud continues to grow strongly, while spending on traditional non-cloud infrastructure is on the decline. With own-designed hardware manufactured by ODMs [original design manufacturers] now being such a big feature of public cloud infrastructure, these trends are ratcheting up the competitive pressure on the mainstream server, storage and networking vendors,” said John Dinsdale, chief analyst and research director at Synergy Research Group.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.