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How Cloud Fuels Digital Business Transformation

Across the globe, many CEOs invested in initiatives to expand their digital offerings. User experience enhancements that are enabled by business technology were a priority in many industries.

Worldwide end-user spending on public cloud services is forecast to grow 21.7 percent to a total of $597.3 billion in 2023 -- that's up from $491 billion in 2022, according to the latest market study by Gartner.

Cloud computing is driving the next phase of digital transformation, as organizations pursue disruption through technologies like generative Artificial Intelligence (AI), Web3, and enterprise Metaverse.

Public Cloud Computing Market Development

"Hyperscale cloud providers are driving the cloud agenda," said Sid Nag, vice president at Gartner.

Organizations view cloud computing as a highly strategic platform for digital transformation initiatives, which requires providers to offer new capabilities as the competition for digital business escalates.

"For example, generative AI is supported by large language models (LLMs), which require powerful and highly scalable computing capabilities to process data in real-time," added Nag.

According to the Gartner assessment, cloud computing offers the perfect solution and platform. It is no coincidence that some of the key players in the Generative AI race are public cloud hyperscalers.

Growth is pervasive across the whole spectrum of possibilities. All segments of the cloud computing market will grow in 2023.

Infrastructure-as-a-Service (IaaS) is forecast to experience the highest public cloud end-user spending growth in 2023 at 30.9 percent, followed by platform-as-a-service (PaaS) at 24.1 percent.

Gartner predicts that by 2026, 75 percent of organizations will adopt a digital business transformation model predicated on cloud computing as the fundamental underlying IT platform. 

"The next phase of IaaS growth will be driven by customer experience, digital and business outcomes, and the virtual-first world," said Nag.

Emerging technologies that help businesses interact more closely and in real-time with their customers, such as chatbots and digital twins, rely upon cloud computing infrastructure and platform services to meet growing demands for compute and storage power.

While cloud computing infrastructure and platform services are driving the highest spending growth, Software-as-a-Service (SaaS) remains the largest segment of the market by end-user spending.

SaaS spending is projected to grow 17.9 percent to reach a total of $197 billion in 2023.

"The technology substrate of cloud computing is firmly dominated by the hyperscalers, but leadership of the business application layer is more fragmented," said Nag.

Outlook for Cloud Computing Applications Growth

Service providers are facing demands to redesign SaaS offerings for increased productivity, leveraging cloud-native capabilities, embedded AI, and composability – particularly as budgets are increasingly driven and owned by business technologists.

Gartner analysts believe that this change will ignite a wave of innovation and replacement in the cloud computing platform and software application markets.

That said, I see more IT support for secure remote working solutions that enable flexible working models to attract and retain skilled talent. Also, the demand for Natural Language Processing (NLP) and Prompt Engineering skills will grow rapidly.

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