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Cloud Adoption Is Growing But Forecasts Differ on How Much

Feb 22, 2017

Overall demand for cloud computing in all its guises will grow 18% this year to $246.8 billion in total worldwide revenue from $209.2 billion, according to a new forecast from market research firm Gartner.

Of that total, demand for a subset of services called public cloud infrastructure is expected to grow a whopping 36.8% this year to $34.6 billion in revenue worldwide, according to Gartner (it).

This part of overall cloud computing comprises basic computing, networking, and storage services running in data centers managed by the likes of Amazon Web Services, Microsoft, or Google. More companies large and small are switching to these facilities, rather than expanding their own data centers.

Growth for these infrastructure services will be stoked by the proliferation of data collected from devices in cars, appliances, fitness gadgets, and factory machines. Those "connected devices" are known collectively as the Internet of things. Their sensors collect or generate data that needs to be analyzed, and that spells a huge opportunity for public cloud infrastructure. In addition, the growing use of artificial intelligence in medical, consumer, and other business applications requires a lot of brute-force computing power—which will also feeds demand for public cloud infrastructure, according to Gartner.

Another key cloud market segment called Software-as-a-Service (SaaS), in which business applications are delivered to customers over the Internet, should grow about 20% to $46.3 billion, Gartner said. SaaS leaders include companies like Salesforce (crm) and Workday (wday).

Almost every relatively new business software company—names like Box (box), Dropbox, Okta, etc.—relies on the SaaS model. Meanwhile, virtually every older software power including Microsoft, Oracle (orcl), and SAP (sap) is moving to this delivery model as fast as possible both by reworking their existing applications and by buying newer companies born to this world. Customers have shown a strong preference to accessing their software this way.

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Salesforce blazed this SaaS trail starting in the late 1990s. Because that market is maturing, Gartner sees its growth rate slowing a bit, although SaaS will remain the second largest category of cloud, according to a statement by Gartner research director Sid Nag.

The fact that many SaaS companies—which typically used to rely on their own data centers up till now—are starting to use more public cloud resources from Amazon (amzn), Microsoft (msft), IBM (ibm), and Google (googl) is an interesting wrinkle in the overall cloud landscape and could further fuel the growth of public cloud infrastructure providers.

Numbers on cloud computing tend to vary considerably depending on the source, partly because definitions of what defines public cloud or cloud in general differ.

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In its own predictions issued Monday, IDC, another market research firm, estimated that overall cloud services will grow 24.4% year over year to $122.5 billion. The Framingham, Mass.-based research firm said SaaS will remain the biggest piece of the pie, capturing 60% of total cloud spending through 2020.

For those interested in a leader board of how various cloud providers stack up on a leader board, Synergy Research put out its own take early this month

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