Cloud computing grows up – $413 billion and counting…


Cloud computing has been one of the fastest growing and exciting IT markets over the past decade. Typically bought by enterprises wanting to avoid the complexity of setting up, deploying and managing applications them in their own data centers, cloud services come in three flavours – software, platform and infrastructure – to which we attach the phrase ‘as a Service’ to create the sub-markets of SaaS, PaaS and IaaS. In this post I’ll look at their growth from a regional and vendor angle and put cloud spending in context with other areas of the enterprise IT market.

In total spending on the cloud service market grew by 12% in 2022 to reach $413 billion; of the three sub-markets IaaS and PaaS were the strongest, each showing a 13% gain to $143 and $84 billion respectively. SaaS grew by 11% to reach $185 billion in the year – 13% of the total $1.4 trillion software market. My Figure above shows the annual spending on each of the three sub-markets with a forecast to 2024. In that year total spending on cloud services will reach $568 billion, with SaaS accounting for 18% of total software spending.

In 2022 the total cloud services market was worth $413 billion; it was split into three areas of which software as a service was the largest accounting for 47.8% of the total. infrastructure as a service (32.9%) and platform as a service (19.2%) – see my Figure above.
Software as a service was worth $185 billion in the year with Microsoft at its head, achieving a 22.4% share. Salesforce – the original and perhaps best-known SaaS vendor – was in second place with a 12.7% share. Oracle and IBM were also significant suppliers, achieving a 3.6% and 2.7% share of the market respectively.
The Infrastructure and Platform as a service markets were worth $228 billion together in the year. The leading suppliers were:

  • Amazon‘s AWS division achieved a 30.8% share; in the year it started using its Trainium chips in its data centers, announced its mainframe modernization program and continued to expand the countries and zones in which it operates.
  • Google‘s Cloud was in second position with an 11.5% share; during 2022 it partnered with Proximus to deliver sovereign cloud services in Belgium and Luxembourg, with Accenture’s ai.RETAIL platform, launched new telecom and mainframe modernization products; it enhanced its partnerships with Deloitte, T Mobile, HCL, Deutsche Telekom, BT and others, while launching new cloud regions in Malaysia, Thailand, Norway and Sweden. It also acquired Madiant in the year.
  • Microsoft‘s Azure was in third position with a 9.1% market share; during the year it announced partnerships with the London Stock Exchange Group, healthcare software company Epic, Lockheed Martin, UBS, Oracle. It also announced its acquisition of Activision Blizzard, which was eventually blocked by UK regulators over a year later.
  • IBM was in fourth position with an 8.2% market share; it has been expanding its strategy beyond IaaS and PaaS to address ‘hybrid’ cloud environments. It seldom mentioned its pure public cloud developments in its press releases, although it signed a deal with Amazon for IBM’s SaaS offerings to be available on AWS and made a number of acquisitions, including the Azure consultancy Neudesic.

The other leading IaaS/PaaS suppliers included Alibaba, NTT Data and Baidu with 4.9%, 1.9% and 1.6% market shares respectively.

On a regional level sales of IaaS and PaaS cloud services have been far greater in the Americas (49% in 2022) than in EMEA (28%) or Asia Pacific (23%), when assessed using current dollar exchange rates for each period.. EMEA has done a little better and Asia Pacific, a little worse, if we apply constant 2005 $US dollar rates to all periods (the dotted lines in my Figure above). In terms of vendor nationality, American suppliers dominate the markets in EMEA (where France Telecom and OVH are the strongest regional suppliers) and the Americas. Chinese vendor Alibaba is the strongest supplier of all in Asia Pacific, where others include Baidu and NTT Data.

Despite the rapid growth of IaaS and PaaS services, total sales have remain less than other major areas of IT spending. I show the total spending by year from 2005 to 2022, with my forecast to 2024 of outsourcing/managed services, enterprise hardware, infrastructure software and IaaS/PaaS in my figure above.
To a certain extent IaaS/PaaS services are IT sold to those in enterprises who want to deal with applications without having to worry about acquiring, deploying and managing the infrastructure hardware and software. While the pure-play cloud suppliers have been adding resources at the country and industry sector levels, existing enterprise IT suppliers like IBM and Oracle have been expanding their strategies to encompass the use of AWS, Azure, Google Cloud and other platforms as hybrid support for secure, consistent and high performing solutions.
The end of the massive initial growth of cloud services is coming to an end – I expect growth levels to drop to single digits within the next few years and for AWS to remain the key supplier for the foreseeable future.