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Global Public Cloud Computing Revenue Trends

The global public cloud computing market continues its predictable growth trend. By and large, it's viewed as an IT commodity, where customers have no loyalty to cloud service providers that follow a 'race to the bottom' mindset -- providing the lowest price at a given moment in time. That said, everything about this business model seems somewhat tentative.

The worldwide cloud Infrastructure-as-a-Service (IaaS) market grew 29.5 percent in 2017 to reach a total revenue of $23.5 billion -- that's up from $18.2 billion in 2016, according to the latest market study by Gartner. Moreover, Amazon was the leading vendor in the IaaS market during 2017, followed by Microsoft, Alibaba, Google and IBM.

Cloud IaaS Market Development

"The top four providers have strong IaaS offerings and saw healthy growth as IaaS adoption is being fully embraced by mainstream organizations and as cloud availability expands into new regions and countries," said Sid Nag, research director at Gartner. "Cloud-directed IT spending now constitutes more than 20 percent of the total IT budget for organizations using cloud. Many of these organizations are now using cloud to support production environments and business-critical operations."

In the IaaS market, the competitive landscape is consolidating around the current leaders. The top four providers are all hyperscale IaaS providers and represent approximately 73 percent of the total IaaS market and 47 percent of the combined IaaS and infrastructure utility services (IUS) market.

Amazon is the clear leader in the worldwide IaaS market with an estimated $12.2 billion revenue in 2017 -- that's up 25 percent from 2016. Growth in 2017 was driven not only by customers that are migrating from traditional data centers to cloud IaaS, but also by customers implementing digital transformation projects, reflecting a broad range of use cases.

According to the Gartner assessment, Microsoft has secured the number two position in the IaaS market with growth of more than 98 percent on its IaaS offering, with revenue surpassing $3.1 billion in 2017. Microsoft delivers its IaaS capabilities through its Microsoft Azure offering, which is a collection of infrastructure and platform services.

In the third position, China's Alibaba growth in 2017 of 63 percent reflects the company's successful investment in research and development (R&D). Alibaba has the financial capability to continue this trend and invest in global expansion, giving them the potential to become an alternative to the leading global hyperscale cloud providers in select regions. Alibaba could disrupt the current cloud incumbents.

Outlook for Cloud Service Adoption and Growth

"This reflects a fundamental change in what and how organizations are consuming technology. Some legacy infrastructure offerings, such as IUS, are seeing lower and slower uptake that impacts the combined IaaS and IUS market," Mr. Nag said. "Additionally, a groundswell of demand for cloud-skilled personnel is forcing technology providers to change how they compete to meet this exploding demand."

There is no doubt that the IT infrastructure future will be driven by increased cloud computing adoption within on-premises data centers and in public cloud service platforms. A broad variety of hybrid cloud combinations and multi-cloud vendor deployments will be commonplace. What's unclear is the viability of cloud providers that are unable to maintain their ROI, as the competitive battle evolves over time.

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