Cloud

Public cloud services revenue will hit $260B in 2017 thanks to massive SaaS and IaaS growth

Public cloud services revenue will increase 18.5% in 2017 compared to 2016, with SaaS, IaaS, and PaaS earnings outpacing expectations, according to a Gartner report.

The public cloud services market is on the rise worldwide this year, with revenue expected to reach $260.2 billion by the end of 2017—an increase of 18.5% from the year before, according to a new report from Gartner. Strong Software as a Service (SaaS) and Infrastructure as a Service (IaaS) performance are the main drivers of growth, the report found.

"Final data for 2016 shows that software as a service (SaaS) revenue was far greater in 2016 than expected, reaching $48.2 billion," Sid Nag, research director at Gartner, said in a press release. "SaaS is also growing faster in 2017 than previously forecast, leading to a significant uplift in the entire public cloud revenue forecast."

In 2017, SaaS revenue is expected to grow 21% over 2016, reaching $58.6 billion. This rapid increase in adoption is due to providers delivering more applications and add-ons as a service, this report noted. These SaaS solutions are designed for specific purposes, and can often deliver better business outcomes than traditional software, according to Gartner.

SEE: Research: Cloud vs. data center adoption rates, usage, and migration plans (Tech Pro Research)

Further, strategic adoption of Platform as a Service (PaaS) offerings among enterprises is outperforming previous predictions, Nag said in the release. "Enterprise-scale organizations are increasingly confident that PaaS will be their primary form of application development platform in the future," Nag said.

IaaS boasts the highest revenue growth, projected to rise 36.6% in 2017 to reach $34.7 billion.

Public cloud use will likely continue to grow in the coming years, Gartner predicted, reflecting the public cloud's maturity and move to the mainstream.

"As of 2016, approximately 17 percent of the total market revenue for infrastructure, middleware, application and business process services had shifted to cloud," Nag said in the release. "Through 2021, this will increase to approximately 28 percent."

Gartner also predicted that through 2021, 70% of the public cloud services market will be dominated by the top 10 public cloud providers. "In the IaaS segment, Amazon, Microsoft and Alibaba have already taken strong positions in the market," Nag said in the release. "In the SaaS and PaaS segments, we are seeing cloud's impact driving major software vendors such as Oracle, SAP and Microsoft from on-premises, license-based software to cloud subscription models."

Despite the growth of the public cloud, cybersecurity issues are preventing wider adoption: 74% of IT leaders said that security concerns were restricting their organizations' migration to the public cloud, according to a recent report from Barracuda Networks. Cloud providers and enterprises will have to ensure that cybersecurity is factored into public cloud services plans to ensure the best business outcomes.

Want to use this data in your next business presentation? Feel free to copy and paste these top takeaways into your next slideshow.

  • The public cloud services market is predicted to reach $260.2 billion in revenue by the end of 2017—up from $219.6 billion in 2016. -Gartner, 2017
  • SaaS and IaaS are the primary drivers of public cloud growth in 2017. -Gartner, 2017
  • 70% of the public cloud services market will be dominated by the top 10 public cloud providers through 2021. -Gartner, 2017
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Image: iStockphoto/KellyISP

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About Alison DeNisco Rayome

Alison DeNisco Rayome is a Staff Writer for TechRepublic. She covers CXO, cybersecurity, and the convergence of tech and the workplace.

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