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The 2022 Business Case for IT Investments

The global cloud computing market is driven by the belief that provisioning IT infrastructure is without differentiation. Cost reduction is often the key motivation. Moreover, in order to shift their human resources toward the enablement of digital business outcomes, IT leaders are reskilling their legacy IT staff.

The total worldwide public cloud services market grew 29 percent year-over-year in 2021 with revenues totaling $408.6 billion, according to the latest market study by International Data Corporation (IDC).

Market consolidation continued in 2021 with the revenue of the top five public cloud service providers capturing nearly 40 percent of the worldwide total and growing 36.6 percent year-over-year.

Public Cloud Computing Market Development

With offerings in all four deployment categories, Microsoft captured the top position in the overall public cloud services market with 14.4 percent share in 2021, followed closely by Amazon Web Services with 13.7 percent share.

"Organizations continued their strong adoption of shared public cloud services in 2021 to align IT investments more closely with business outcomes and ensure rapid access to the innovations required to be a digital-first business," said Rick Villars, group vice president at IDC.

For the next several years, leading cloud providers will play a critical role in helping enterprises navigate ongoing disruption -- from inflation, supply chain, and geopolitical tensions -- but IT teams will also focus more on bringing greater financial accountability to the variable spend models of public cloud services.

While the overall public cloud services market grew 29 percent in 2021, revenue for foundational cloud services that support digital-first business strategies saw revenue growth of 38.5 percent. This trend highlights the increasing reliance of enterprises on a cloud innovation platform built around widely deployed compute services, data or AI services, and app framework services to drive innovation.

IDC expects spending on foundational cloud services (especially IaaS and PaaS elements) to continue growing at a higher rate than the overall cloud computing market as enterprises leverage cloud services to overcome the current disruptions and accelerate their shift toward digital business growth.

"The last few years have demonstrated that in challenging times, businesses increasingly rely on cloud services to modernize their operations and deliver more value to customers," said Dave McCarthy, research vice president at IDC.

This trend is expected to continue as public cloud providers offer more ways of extending cloud services to on-premises data centers and edge computing locations. These expanded deployment options reduce many barriers to migration and will facilitate the next wave of cloud services adoption.

According to the IDC assessment, in the digital-first world, enterprises that are serious about competing for the long term use the lens of 'business outcomes' to evaluate strategic technology decisions, which fuels the ecosystem within the public cloud market.

Cloud service providers showed a relentless drive to enhance the productivity of enterprise software developers and the overall speed of application delivery -- including an emphasis on containers-first and serverless-first approaches.

SaaS applications remain the largest and most mature segment of public cloud services, with 2021 revenues that have now reached $177 billion. The tailwinds of the COVID-19 pandemic continued to fuel expedited upgrades and replacements of older systems in 2021, though company goals haven't changed.

IDC believes companies now seek applications that will help increase enterprise intelligence, improve operational efficiency, and drive better decision-making. Ease of use, ease of implementation and integration, streamlined workflows, data and analytical accessibility, plus 'time to value' are the key criteria driving purchase decisions.

Outlook for Public Cloud Services Growth 

While both the foundational cloud services market and the SaaS applications market are led by a small number of large cloud service providers, there continues to be a healthy long tail of smaller companies delivering public cloud services around the globe.

In the foundational cloud services market, these leading companies account for nearly three-quarters of the market's revenues with targeted use case-specific PaaS services or cross-cloud compute, data, or network governance services.

The long tail is more pronounced in the SaaS applications market, where customers' growing focus on specific outcomes ensures that over two-thirds of the spending is captured outside the top five hyperscale public cloud service providers.

That said, I foresee more organizations auditing their annual cloud computing services spend, with the intent to uncover potential cost savings. Meanwhile, on-premises corporate data center ongoing investment will be evaluated from a similar perspective. In both scenarios, IT business cases will be scrutinized closely by savvy CFOs and CEOs.

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