Cloud Services Market Seeing Explosive Growth

Gartner this week confirmed what the rest of the IT industry has known for years: the cloud is the next sure-fire growth market for hardware, software and services providers around the world.

In a report released this week, Gartner is now projecting worldwide cloud services revenue will soar to more than $68.3 billion this year, a 16.6 percent improvement from an already-robust 2009 and a harbinger of things to come.

Cloud-computing services sales will surge to more than $148 billion by 2014, according to Gartner’s forecast, a definitive sign that enterprise customers have come to accept that era of traditional on-premise software and hardware installations has come and gone. The distributed workforce, the ubiquity of smartphones and the fervent need to cut IT costs at every opportunity has transformed cloud computing from an intriguing curiosity to standard operating procedure.

Earlier this month, computer and IT services giant HP (NYSE: HPQ) said as much when it detailed plans to slash more than 9,000 jobs over the next three years to embrace cloud computing not only to drive revenue but as an integral part of how it does business internally.

“We are seeing an acceleration of adoption of cloud computing and cloud services among enterprises and an explosion of supply-side activity as technology providers maneuver to exploit the growing commercial opportunity,” Gartner’s Ben Pring said in the report.

“The scale of application deployments is growing; multi-thousand-seat deals are increasingly common,” he added. “IT managers are thinking strategically about cloud service deployments; more-progressive enterprises are thinking through what their IT operations will look like in a world of increasing cloud service leverage. This was highly unusual a year ago.”

Gartner now says large companies in the next five years will spend more than $112 billion on Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) projects.

“After many years of germination, most notably in the SaaS arena, the core ideas at the heart of cloud computing — such as pay for use, multi-tenancy and external services — appear to be resonating more strongly,” Pring said.

Cost-saving advantages

Gartner researchers said basic economics is at the root of this cloud-computing groundswell.

“The financial turbulence of the last 18 months has meant every organization has been scrutinizing every expenditure,” Pring said. “An IT solution that can deliver functionality less expensively and with more agility (remembering that time is money) is hard to ignore against this backdrop.”

While there are still serious security issues yet to be resolved, CIOs are giving cloud-based applications, storage and security options the benefit of the doubt in the name of speeding IT deployments and substantially reducing operating expenses.

The report found that North American and European markets represent the largest markets from a geographic perspective, and while other geographies around the world will experience growth, this growth will not notably alter the overall weighting away from the larger, more-mature regions over the course of the next five years.

The U.S. stands at the forefront of cloud experimentation, accounting for more than 60 percent of cloud-services sales in 2009 — a ratio that will gradually contract as Asian, European and South American corporations jump onboard the cloud bandwagon.

“We have not seen any evidence yet to support the often-touted hypothesis that smaller and/or developing countries will “leapfrog” Western markets — and come to represent a large proportion of the overall worldwide market — through their adoption of the Internet and cloud services,” Pring said.

Larry Barrett is a senior editor at, the news service of, the network for technology professionals.