Why public cloud revenue will reach $186.4 billion in 2018

Around the globe, CIOs and CTOs continue to transition to a hybrid multi-cloud service delivery model, supported by on- and off-premises IT infrastructure. Meanwhile, the worldwide public cloud services market is projected to grow 21.4 percent in 2018 to reach $186.4 billion - that's up from $153.5 billion in 2017.

The fastest-growing segment of the market is cloud Infrastructure as a Service (IaaS), which is forecast to grow 35.9 percent in 2018 to reach $40.8 billion, according to the latest worldwide market study by Gartner.

Public cloud market development

Moreover, Gartner expects the top 10 cloud service providers to account for nearly 70 percent of the IaaS market by 2021 - that's up from 50 percent in 2016.

"The increasing dominance of the hyperscale IaaS providers creates both enormous opportunities and challenges for end-users and other market participants," said Sid Nag, research director at Gartner.

According to the Gartner assessment, while public cloud enables efficiencies and cost benefits, organizations need to be cautious about IaaS providers potentially gaining unchecked influence over CIO and CTO budgets.

In response to multi-cloud adoption trends, organizations will increasingly demand a simpler way to move workloads, applications and data across cloud providers' IaaS offerings without penalties. And, cloud migration and management tools will be instrumental in easing the transition to hybrid IT scenarios.

Software as a service (SaaS) remains the largest segment of the cloud market, with revenue expected to grow 22.2 percent to reach $73.6 billion in 2018. Gartner expects SaaS to reach 45 percent of total application software spending by 2021.

"In many areas, SaaS has become the preferred delivery model," said Mr. Nag. "Now SaaS users are increasingly demanding more purpose-built offerings engineered to deliver specific business outcomes."

Within the platform as a service (PaaS) category, the fastest-growing segment is database platform as a service (dbPaaS), expected to reach almost $10 billion by 2021. Hyperscale cloud providers are increasing the range of services they offer to include dbPaaS.

"Although these large vendors have different strengths, and customers generally feel comfortable that they will be able to meet their current and future needs, other dbPaaS offerings may be good choices for organizations looking to avoid lock-in," said Nag.

Outlook for public cloud market growth

Although public cloud revenue is growing more than initially forecast, Gartner expects growth rates to stabilize from 2018 onward, reflecting the maturity that public cloud services will gain within a wider IT spending mix that includes private cloud and traditional on-premises IT infrastructure.

Note that this forecast excludes cloud advertising, which was removed from Gartner's public cloud service forecast segments in 2017.

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