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Public Cloud Service Revenue will Reach $113B in 2018

The public cloud computing sector continues to thrive, as more enterprise CIOs seek sustainable ways to free themselves from the burden of updating the inflexible high-cost proprietary software platforms in their own data center.

According to the '1Q15 Public Cloud Benchmark' study by Technology Business Research (TBR), the public cloud market will reach $80 billion in 2015 and continue growing quickly -- now forecast to reach $113 billion by 2018.

"The public cloud market is as hot as ever right now," said Jillian Mirandi, senior analyst at TBR. "After a few years of incumbent vendors trying to scare the market away from public clouds, they now offer and promote public clouds as part of their hybrid IT strategy."

Public cloud pure-play service providers will continue investing in IT security, new data centers and geographic expansion in a successful effort to win more large enterprise deals.

Integrated SaaS, PaaS and IaaS Offerings

In addition, TBR believes that it's very likely that we'll see a number of niche industry-specific SaaS vendors emerge and greater synergies in public cloud PaaS and IaaS solutions over the next few years.

Today, leading vendors are investing heavily to expand their reach and stay ahead of their competition. These cloud providers are adding horizontal suites to their portfolios, customizing vertically, integrating with other leading vendors, and easing development and deployment processes for third-party software developers.

Similarly, they are expanding geographically to win new business and educate markets on the inherent benefits of their open source software foundation, as well as building new data centers in more locations to mitigate data sovereignty concerns.

Key Public Cloud Market Trends

Moreover, SaaS market leaders -- such as Salesforce and Workday -- integrate within their own portfolios, repackaging technology to expand into new lines of business or industry verticals. TBR believes that integration between competitors within SaaS workloads will increase as enterprise customers move to hybrid cloud environments and look to purchase pre-integrated solutions.

Besides, public cloud companies improve developer appeal by adding Linux containerization, open APIs and by providing automated distribution capabilities via software application stores.

As an example, ServiceNow and Verizon launched app stores to give independent software developers a customer base in which to sell and to monetize their offerings. In a different vein, Salesforce launched a marketplace for developers to buy build-packs and add-ons that make application creation easier.

Furthermore, market saturation, challenging macroeconomic conditions in Europe, and slowdowns in China and Japan are pushing public cloud service providers to invest in emerging markets such as India. Data center investments and partnerships will be a primary way to enter new regions.

What's more, partnerships with local IT consulting and systems integration firms, in particular, will be essential for multinational public cloud providers to gain regional brand awareness and establish credibility in these new markets.

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