Largest Share of Public Cloud Growth to Come From Enterprise Spending

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By: Jacqueline Lee|

Nearly half of all public cloud growth will come from businesses with more than 1,000 employees, according to a new research report from International Data Corporation (IDC). Overall, public cloud spending will grow 24.4 percent in the 2017 fiscal year. Through 2020, IDC forecasts compound annual growth of 21.5 percent, at which point public cloud spending will be $203.4 billion worldwide.

Although the majority of public cloud spending will focus on software-as-a-service (SaaS), both infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) procurement are growing at a faster pace than SaaS. Currently, SaaS comprises nearly two-thirds of public cloud spending. By 2020, that share will have decreased to 60 percent, with IaaS growing at a 30.1 percent compound annual growth rate and PaaS growing at 32.2 percent during the same time period.

Top SaaS spending priorities include customer relationship management (CRM) and enterprise resource management (ERM) applications. The industries that spend the most on public cloud include discrete manufacturing, professional services and banking.

What Drives Public Cloud Growth in the Enterprise?

Although some enterprises use a moderate amount of private cloud to protect regulated data and host low-latency applications, most businesses have transitioned into a hybrid cloud mindset that embraces public cloud providers. McKinsey predicts enterprises will transform their vision from building IT services to consuming IT, with a focus on time to market, quality and cost-effectiveness.

Enterprises may also benefit from the cloud brokerage model of consuming cloud services in coming years, which helps them to leverage the vendor agnosticism provided by integrating heterogeneous cloud environments. Cloud brokerage services also provide expense tracking and billing management — processes that often prove challenging for the enterprise.

“Most businesses have virtually no insight into whether they are spending too much on cloud services or are efficiently utilizing their investment,” writes Vincent Smyth, a general manager for Flexera who oversees international business operations, in an ITProPortal article.

The Cloud in Manufacturing and Banking

Discrete manufacturing businesses face a growing avalanche of data generated by the Internet of Things. To store and glean business intelligence value from their data, many are turning to public cloud.

Cloud services make it easier for distributed manufacturing locations to gain real-time access to data and other resources. Cloud environments are also elastic, which means better scalability in times of increased production demand. Additionally, manufacturers can move some ERM applications to the cloud without abandoning on-premises legacy applications. According to Manufacturing Business Technology, cloud solutions can cut manufacturing IT expenditures by as much as 54 percent.

In banking, the flexibility of the cloud is starting to outweigh historic security concerns. World Bank CIO Stephanie von Friedeberg says her organization designates some applications for the public cloud while keeping those that are too complex or sensitive in different environments. At the World Bank, senior management makes the final decision about what can be hosted in public cloud and what can’t.

“We have a very good dialogue with the business to say, ‘Does this belong in the cloud?'” von Friedeburg tells CIO.

Growth All Over the Globe

According to IDC, U.S. organizations will make up the largest scare of public cloud spending worldwide followed by Western Europe and the Asia-Pacific region, excluding Japan. The fastest cloud growth will come from Asia-Pacific and Latin America, with spending increases of 28 and 26.6 percent, respectively.

“As cloud adoption expands over the next four years, what clouds are and what they can do will evolve dramatically,” predicts Frank Gens, senior VP and chief analyst for IDC. “The use cases for the cloud will dramatically expand.”

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About The Author

Jacqueline Lee

Freelance Writer

Jacqueline Lee specializes in business and technology writing, drawing on over 10 years of experience in business, management and entrepreneurship. Currently, she blogs for HireVue and IBM, and her work on behalf of client brands has appeared in Huffington Post, Forbes, Entrepreneur and Inc. Magazine. In addition to writing, Jackie works as a social media manager and freelance editor. She's a member of the American Copy Editors Society and is completing a certificate in editing from the Poynter Institute.

Articles by Jacqueline Lee
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