Worldwide end-user spending on public cloud services is forecast to grow 21.7% to total $597.3 billion in 2023, up from $491 billion in 2022, according to the latest forecast from Gartner, Inc. Cloud computing is driving the next phase of digital business, as organizations pursue disruption through emerging technologies like generative artificial intelligence (AI), Web3 and the metaverse.
“Hyperscale cloud providers are driving the cloud agenda,” says Sid Nag, vice president analyst at Gartner, in a statement. “Organizations today view cloud as a highly strategic platform for digital transformation, which is requiring cloud providers to offer more sophisticated capabilities as the competition for digital services heats up.”
Nag added, “Generative AI is supported by large language models (LLMs), which require powerful and highly scalable computing capabilities to process data in real-time. Cloud offers the perfect solution and platform. It is no coincidence that the key players in the generative AI race are cloud hyperscalers.”
Infrastructure-as-a-service (IaaS) Growth forecast
All segments of the cloud market are expected see growth in 2023. Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2023 at 30.9%, followed by platform-as-a-service (PaaS) at 24.1%.
The Stamford, Conn. research firm also predicts that by 2026, 75% of organizations will adopt a digital transformation model predicated on cloud as the fundamental underlying platform.
“The next phase of IaaS growth will be driven by customer experience, digital and business outcomes and the virtual-first world,” said Nag. “Emerging technologies that help businesses interact more closely and in real time with their customers, such as chatbots and digital twins, are reliant upon cloud infrastructure and platform services to meet growing demands for compute and storage power.”
While cloud infrastructure and platform services are driving the highest spending growth, SaaS remains the largest segment of the cloud market by end-user spending. SaaS spending is projected to grow 17.9% to total $197 billion in 2023.
“The technology substrate of cloud computing is firmly dominated by the hyperscalers, but leadership of the business application layer is more fragmented,” said Nag. “Providers are facing demands to redesign SaaS offerings for increased productivity, leveraging cloud-native capabilities, embedded AI and composability – particularly as budgets are increasingly driven and owned by business technologists. This change will ignite a wave of innovation and replacement in the cloud platform and application markets.”
If you enjoyed this article and want to receive more valuable industry content like this, click here to sign up for our digital newsletters!