Cloud computing at $344b – the Enterprise IT market squeeze continues


The cloud services (IaaS, PaaS and SaaS) market reached a total of $344b in the year to the end of June 2021. Excluding SaaS spending on IaaS and PaaS was $179 billion, already significantly more than the total of other enterprise IT spending (see my Figure above). In this post I look at various aspects of the cloud service market to help you put it in perspective.

Cloud services have sprung up from nowhere in the early 2020s to being one of the most important components of Enterprise computing. I subdivide the total into three categories:

  • Software as a Service (SaaS) is typically the provision of business applications – complete with the ability to save and protect your data – by the software vendor. It is essentially an extension of the software market, accounting for roughly 15% of the total. There are some suppliers, like Salesforce.com, who specialise in SaaS; although the majority (think IBM and SAS) offer SaaS extensions to offerings designed to be run ‘on premise’. Worldwide users spent $165b on this in the last year.
  • Infrastructure as a Service (IaaS) is the provision of computing, storage and networking resources on demand, on a pay-as-you-go basis. The IaaS customer uses its own software licenses to build and run applications. This was worth $111b in the last year.
  • Platform as a Service (PaaS) includes the same components of IaaS and adds development tools, business intelligence (BI), DataBase Management Software (DBMS) and other middleware into the fee, making it a richer solution. Here spending was $68b over the same period.

I show the totals for each offering by quarter since the inception of the cloud market in my Figure above. Individually and combined these have been the strongest growing elements of the Enterprise market throughout this period.

The US market (the vast majority of ‘the Americas’ shown in my Figure above) has driven cloud services adoption. In the last year spending in the Americas grew by 23% to $46b, in Asia Pacific it was $21b (with a 27% growth), while in EMEA spending was $26b (up 20%) – when measured with variable currency exchange rates to the $US; in both cases growth was less when measured in local currencies due to the fall in the value of the $US over the year. In fact cloud service growth in EMEA was significantly less than the other regions – just (!) 12%.

I show the quarterly growth rates at variable $US currency conversion for each region is shown in my Figure above. The relatively sluggishness of the market in EMEA is interesting – due perhaps to the complexities of offering these services into multiple mature countries and the relatively immaturity of IT markets in Africa and parts of Eastern Europe.

Market shares for the combination of IaaS and PaaS, SaaS and the total of all three markets in the last year are shown in my Figure above. The leaders of each area have remained relatively constant over the years, with the big changes being Microsoft overtaking Salesforce.com 2016 in the SaaS market and the rise of Chinese supplier Alibaba in the IaaS/PaaS area.
We shouldn’t get over-excited about cloud services since, despite their strong growth rates, they still are only small proportions of the wider markets they are part of; SaaS in 2021 will be 13% of the software, and IaaS/PaaS 8% of the total IT service market. However there is a continued debate about the negative effects the success of IaaS/PaaS has on the pre-existing Enterprise computing market (which for the purposes of this post I have defined as all servers, storage systems, networking and infrastructure software complete with half of the spending on peripherals and PCs). The building of their own systems by the largest Cloud Service Providers (CSPs) has undoubtedly held back growth in server and storage system purchases. However the increasing need to secure corporate data, mix cloud with on-premise workloads and include all IT spending within a single budget is making things harder for pure-play CSPs, putting the ball back firmly in the court of those companies able to handle the challenges of building solutions which bridge the gap between cloud and on-premise computing. Although cloud’s squeeze on other types of Enterprise computing continues, it’s helping to grow the size of the total.

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  1. […] to have stalled. No doubt spending would be much higher if the self-built systems of the largest cloud computing weren’t continuing to eat up commercial workloads. Within the market the leading vendors […]