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Why Public Cloud Fragmentation Adds Complexity

The large enterprise quest to shift more IT workloads to hyperscale cloud service providers was pursued with the expectation of streamlining business processes for new digital transformation projects. While there are benefits to adopting public cloud services, there remain inherent IT management complexities.

The global public cloud services market includes a broad mix of Infrastructure as a Service (IaaS), System Infrastructure Software as a Service (SISaaS), Platform as a Service (PaaS), and Software as a Service (SaaS), which grew by 24.1 percent year-over-year in 2020 with revenues totaling $312 billion, according to the latest worldwide market study by International Data Corporation (IDC).

Spending continued to consolidate in 2020 with the combined revenue of the top 5 public cloud service providers capturing ~38 percent of the worldwide total, and it's growing 32 percent year-over-year.

Due to an expanding portfolio of SaaS and SISaaS offerings, Microsoft now shares the top position with Amazon Web Services in the whole public cloud services market, with both companies holding a 12.8 percent revenue share.

Public Cloud Market Development

"Access to shared infrastructure, data, and application resources in public clouds played a critical role in helping organizations and individuals navigate the disruptions of the past year," said Rick Villars, vice president at IDC. "In the coming years, enterprises' ability to govern a growing portfolio of cloud services will be the foundation for introducing greater automation into business and IT processes while also becoming more digitally resilient."

While the overall public cloud services market grew 24.1 percent in 2020, consistent with the past four years, the IaaS and PaaS segments of the global market have consistently grown at much faster rates.

This growth highlights the increasing reliance of enterprises on a cloud computing foundation built on cloud infrastructure, software-defined data, compute and governance solutions 'as a Service', and cloud-native platforms for application deployment.

IDC expects spending on foundational cloud services (especially IaaS and PaaS) to continue growing at a higher rate than the overall cloud market as resilience, flexibility, and agility guide enterprise IT platform investment decisions.

IDC analysts believe that cloud service providers are expanding their portfolio of infrastructure and platform services to address confidential computing, performance-intensive computing, and hybrid deployment scenarios. Extending these foundational cloud services to customer premises and communications networks enables a broader set of use cases.

The high pace of growth in PaaS, IaaS, and SISaaS, which combined account for about half of the public cloud services market, reflects the demand for solutions that accelerate and automate the development and delivery of modern applications. This mix also accounts for more IT complexity.

As organizations adopt DevOps approaches and align according to value streams, IDC is seeing PaaS, IaaS, and SISaaS solutions being adopted and, at the same time, grow in the range of services they provide. Innovations in cloud edge computing and IoT use cases contribute to faster growth rates.

SaaS applications are the largest and most mature segment of the public cloud market with 2020 revenues of $148 billion. Organizations across industries replaced some legacy business applications with SaaS applications that are data-driven, intuitive, composable, and enabled by distributed architectures.

Organizations looking for industry-specific applications can choose from a growing assortment of vertical industry applications. That said, the SaaS apps market is still dominated by a longtail of providers that account for 65 percent of the total market, according to the IDC assessment.

Outlook for Public Cloud Services Growth

Looking at the market segment results, IDC says a combined view of IaaS, SISaaS, and PaaS spending is relevant because it represents the foundational set of services that end customers and SaaS companies consume when running, modernizing, building, and governing applications on shared public clouds.

In the combined IaaS, SISaaS, and PaaS market, the top 5 companies -- Amazon Web Services, Microsoft, Google, Alibaba, and IBM -- captured over 51 percent of global public cloud revenues. But there continues to be a healthy long tail of other providers, representing nearly half the market total.

These are companies with targeted use case-specific PaaS services or cross-cloud compute, data, or network governance services. The long tail is even more pronounced in SaaS, where customers growing focus on specific outcomes ensures that over two-thirds of the spending is outside the top 5 cloud service providers.

Moreover, I believe that the vast majority of large enterprise CIOs and CTOs will support a hybrid cloud model where on-premises data centers continue to host the lion's share of essential software applications -- supplemented by SaaS apps, and/or PaaS apps, as needed. That's the market reality.

Why? Public and private cloud 'coexistence strategies' are proven to deliver superior flexibility, better IT security options, and also reduce vendor lock-in risks. However, the task of ongoing multi-cloud service subscription cost-containment management is still a huge challenge for many IT organizations.

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