Cloud revenues to touch $20bn by 2016 with PaaS as the fastest growing segment

Cloud computing sector will grow at a pace of 36% every year and its revenues will fall just shy of $20bn (£12.7bn) by 2016

The cloud computing sector will grow at a pace of 36% every year and its revenues will fall just shy of $20bn (£12.7bn) by the end of 2016, according to Market Monitor – part of analyst firm 451 Research.

Among the sub categories, the PaaS (platform as a service) layer accounted for nearly a quarter (24%) of the total public cloud revenue in 2012. But the research report estimates the segment to experience the fastest growth between 2012 and 2016 – a projected CAGR (compound annual growth rate) of 41%. 

Infrastructure as a service (IaaS), another cloud segment accounted for the majority of total market revenue in 2012, with more than half of the total public cloud market share but will be behind PaaS growth at 37% CAGR through 2016.

“Cloud computing is on the upswing and demand for public cloud services remains strong,” said Yulitza Peraza, analyst, quantitative services, 451 Research and co-author of the report.

Meanwhile the infrastructure SaaS (software as a service) sector, which does not include enterprise SaaS revenue, represented 25% of total cloud revenue in 2012 and is expected to generate a 29% CAGR through 2016, according to Market Monitor.

But a TechTarget and Computer Weekly UK IT priorities survey 2013 revealed that enterprise SaaS continues to be the top cloud service that the UK enterprises plan to use in 2013, despite newer cloud services such as datacentre as a service, database as a service or even testing and development as a service.

IaaS was the second-most popular cloud service, with around 34% of some 400 IT executives surveyed planning to use it in 2013.

Large companies holding bigger shares of the cloud pie

The Market Monitor report also revealed that publicly traded companies, comprising 23% of the cloud suppliers tracked, generate 78% of the total revenue.

Only a dozen suppliers generated more than $75m (£48m) each in revenue in 2012 and the report found the majority of suppliers were still below the $5m revenue threshold. The mid-sized cloud suppliers (with estimated revenue of between $5m and $50m) accounted for 25% of total revenue in 2012. 

“Several suppliers currently included in the cloud ‘midmarket’ are titans in their core IT sectors,” said Greg Zwakman, research director, quantitative services, 451 Research.

“It is still early days for the cloud divisions at these suppliers and running the same revenue distribution analysis against our 2016 forecasts paints a different picture,” Zwakman said.

About 83% of all services provider generated $15m (£9.5m) or less each in 2012 revenue, the study found.

"However, public cloud adoption continues to face hurdles including security concerns, transparency and trust issues, workload readiness and internal non-IT-related organisational issues,” said Peraza.

The findings of another global survey of CIOs into attitudes and concerns relating to cloud computing revealed that almost 80% are concerned about the hidden costs associated with cloud computing. Complex backup and recovery in the cloud, inefficient cloud storage and employees' use of unauthorised cloud services all accounted for cloud's hidden costs. 

CIOs must develop a new approach to work in today’s complex, hybrid and dynamic environments if they want to effectively monitor and manage modern cloud-based applications and services, according to Thomas Mendel, managing director of Research In Action.

“Failure to do so could have a hugely detrimental impact on reputation, customer loyalty and revenues,” said Mendel.

Research Monitor’s cloud computing report called Cloud as a service overview provided current market size and five-year growth rates for the IaaS, PaaS and SaaS sectors, as well as the forecasts for revenue generated by 309 cloud-services providers and technology suppliers across 14 sectors.

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