The forecast for cloud infrastructure spending over the next two years indicates significant growth, driven by substantial increases in Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) revenues. This article delves into the projections and key trends for various cloud service categories, drawing insights from recent data and predictions made by Gartner, a prominent IT market research organization.
Forecast Overview and Adjustments
Complexity of Predicting Cloud Infrastructure Spending
Predicting cloud infrastructure spending can be complex due to the ease with which capacity can be scaled up or down. Despite this, Gartner has released its financial projections for cloud infrastructure spending for 2024 and 2025. Notably, Gartner has adjusted its previous forecasts from this past spring, lowering its projections for IaaS revenues in 2024 from slightly over $180 billion to approximately $169.8 billion. This updated figure still represents a substantial growth rate of 21.3 percent year-over-year, underscoring the ongoing expansion and investment in cloud infrastructure.
This adjustment illustrates the dynamic nature of the cloud services market and the challenges inherent in forecasting future expenditures. The ability to swiftly scale cloud services is both a strength and a variable, as businesses can readily adjust their cloud capacity based on current needs. Despite the downward adjustment, the forecasted growth signals strong confidence in the sector’s robust expansion. As companies continue to migrate to cloud-based solutions, the overall market trajectory remains upward, reaffirming the critical role of cloud infrastructure in modern business operations.
Shifts in Forecast Categories
Gartner’s forecast methodology has evolved over time. Previously, the organization included cloud management, security services, and BPaaS (Business Process as a Service) in its overall cloud infrastructure spending forecasts. However, recent reports have removed these elements from the primary dataset. For instance, cloud management and security services were projected to generate $50 billion in revenues for 2024, and BPaaS was expected to drive $82.3 billion. With these categories excluded from the mix, Gartner’s current dataset focuses more narrowly on IaaS, PaaS, SaaS, and DaaS.
This refinement in the forecast categories allows for a more precise analysis of the primary elements driving cloud infrastructure spending. Excluding additional services such as cloud management and security services provides a clearer picture of the core cloud services market. As a result, this focused approach enhances the accuracy of the projections and aligns them more closely with the fundamental components of cloud infrastructure. The updated methodology also helps to better understand the specific growth patterns and investment trends within individual service categories like IaaS, PaaS, SaaS, and DaaS, which are central to the future landscape of cloud computing.
Category Analysis – IaaS and PaaS
Historical Growth and Convergence
One significant observation is the steady alignment between IaaS and PaaS revenues over recent years. Since 2021, these two categories have experienced parallel growth trajectories, painting an interesting picture of the cloud services market. Historical data from 2015 shows IaaS revenue was $16.2 billion—more than four times higher than PaaS revenue, which stood at $3.8 billion. However, by 2019 and 2020, PaaS spending had grown significantly and achieved near parity with IaaS. The COVID-19 pandemic further accelerated this trend, bringing IaaS and PaaS spending into close alignment from 2021 onwards.
This convergence indicates a shift in how businesses utilize cloud services, increasingly favoring platforms that offer integrated infrastructure and application development capabilities. The alignment of IaaS and PaaS growth trajectories suggests a growing preference for comprehensive solutions that encompass both infrastructure management and application development environments. This trend underscores the evolving needs of enterprises seeking to optimize their cloud strategies, emphasizing the importance of robust and seamless integrations between infrastructure and platform services.
Future Projections for IaaS and PaaS
For 2025, Gartner predicts that IaaS spending will increase by 24.8 percent to reach $211.9 billion, while PaaS revenues are expected to grow by 21.6 percent to $208.6 billion. These projections suggest that the convergence of IaaS and PaaS spending will continue as businesses increasingly adopt cloud platforms that seamlessly integrate infrastructure and platform services. The anticipated growth rates reflect the growing demand for scalable, flexible, and efficient cloud solutions that cater to a wide array of enterprise needs, from basic infrastructure provisioning to sophisticated application development environments.
The parallel growth of IaaS and PaaS highlights the synergy between these two categories, driving significant investment and innovation in the cloud market. As businesses look to streamline their operations and enhance their digital transformation efforts, the integrated capabilities of IaaS and PaaS provide a compelling value proposition. The continued alignment of these categories also points to a future where cloud platforms offer more cohesive and comprehensive solutions, reducing the complexity and enhancing the efficiency of cloud adoption for enterprises across various industries.
Category Analysis – SaaS
Dominance and Revenue Growth
SaaS remains the largest segment of the cloud services market. Since 2015, SaaS has accounted for the largest share of cloud infrastructure spending, even though its proportion of the overall cloud pie has stabilized at just above 40 percent—down from over 60 percent a decade ago. Despite this relative decrease in its share, the absolute revenue figures for SaaS continue to grow considerably. In 2024, SaaS is forecast to generate $250.8 billion in sales globally. Moving forward into 2025, SaaS revenues are expected to rise by 21.6 percent to reach $299.1 billion.
This sustained growth within the SaaS sector can be partially attributed to the widespread adoption of software solutions hosted on the cloud, which offer businesses unparalleled flexibility and scalability. The substantial revenue figures reinforce the notion that SaaS remains indispensable for organizations seeking cost-effective and efficient ways to enhance their operations. The appeal of SaaS lies in its ability to provide access to powerful software tools and applications without the need for extensive on-premises infrastructure, simplifying IT management and reducing operational costs.
Factors Driving SaaS Growth
The sustained growth in SaaS revenues can be attributed to the increasing adoption of cloud-based software solutions by businesses of all sizes. The flexibility, scalability, and cost-effectiveness of SaaS offerings make them an attractive option for organizations looking to streamline operations and enhance productivity. Additionally, the continuous innovation and expansion of SaaS applications across various industries contribute to its robust growth trajectory. Innovations in areas such as artificial intelligence, machine learning, and data analytics are increasingly being embedded into SaaS platforms, making them even more valuable to enterprises.
Moreover, the shift towards remote and hybrid work models has further accelerated SaaS adoption, as businesses seek to provide their employees with access to digital tools and applications, regardless of their location. This trend has underscored the importance of SaaS in maintaining business continuity and operational efficiency in the face of unforeseen disruptions. The growing reliance on cloud-based software solutions is expected to fuel further growth in the SaaS market, solidifying its position as the largest segment within the cloud services industry.
Category Analysis – DaaS
Limited Adoption and Growth Prospects
Desktop as a Service (DaaS) is identified as a less successful element of cloud services. Despite the logical benefits of having PCs operate from the cloud accessed by lightweight client devices, the uptake for DaaS has been minimal. It comprises only a fraction of the overall cloud spending and has not seen robust growth. This suggests that users still prefer having powerful local hardware for computing tasks instead of relying on a virtual desktop environment. The limited adoption of DaaS indicates a gap between the theoretical advantages of the service and its practical implementation and acceptance in the business landscape.
The challenges associated with DaaS adoption are multifaceted, involving issues related to performance, security, and user experience. The reliance on a steady and fast internet connection for optimal performance can be a barrier, particularly in regions with less reliable connectivity. Furthermore, security concerns around data transmission and storage in a virtualized environment contribute to hesitancy among businesses considering DaaS solutions. These factors collectively dampen the growth prospects for DaaS, highlighting the need for significant improvements and assurances before broader adoption can be realized.
Challenges and Future Outlook for DaaS
Without significant corporate mandates to shift to cloudy PCs, DaaS appears unlikely to see substantial growth or adoption. The challenges associated with DaaS include concerns over performance, security, and the user experience compared to traditional desktop setups. Unless these issues are addressed and more organizations embrace virtual desktop environments, DaaS will likely remain a niche segment within the broader cloud services market. The future outlook for DaaS hinges on overcoming these substantial hurdles, as well as the development of more compelling use cases that demonstrate clear advantages over traditional desktop environments.
Investments in improving the underlying technology and addressing security concerns could pave the way for DaaS to become more widely accepted. However, the path to widespread adoption is likely to be gradual, as businesses weigh the benefits against the challenges. In the meantime, DaaS will continue to occupy a smaller portion of the cloud services market, with growth rates that lag behind those of other cloud service categories. The evolution of DaaS will depend on both technological advancements and shifts in organizational strategies towards adopting more flexible and scalable desktop solutions.
Consolidated Cloud Services Spend
Overall Market Growth
When combining the revenues from IaaS, PaaS, SaaS, and DaaS, Gartner forecasts that total cloud services spending will reach $595.7 billion in 2024, marking a 19.2 percent year-over-year increase. For 2025, total spending is expected to rise by 21.4 percent, culminating in projected revenues of $723.4 billion. This consolidated growth underscores the pervasive influence of cloud services across various industries and highlights the importance of cloud infrastructure in supporting digital transformation initiatives.
The robust growth trajectory is indicative of the sustained demand for cloud solutions that offer agility, scalability, and cost savings. The combined revenues reflect the comprehensive adoption of cloud services by businesses seeking to leverage the advantages of cloud computing for enhanced operational efficiency and innovation. As more enterprises continue to transition to cloud-based infrastructure and services, the overall market growth is expected to maintain its upward momentum, driven by ongoing investments in cloud technologies and the development of new and innovative solutions.
Bundled Cloud Infrastructure and Platform Services
Gartner has started to highlight the trend of bundled purchases in cloud infrastructure and platform services, referred to as CIPS (cloud infrastructure and platform services). In 2022, CIPS represented 70 percent of the combined IaaS and PaaS revenues. This bundling trend is expected to continue, with CIPS making up 71 percent of revenues in 2024 and 71.6 percent in 2025. This indicates that a significant portion of cloud customers prefer integrated service offerings combining infrastructure and platform elements under a single umbrella.
The appeal of bundled services lies in their ability to simplify procurement and management processes for enterprises. By offering a cohesive package that integrates various components of cloud infrastructure and platform services, CIPS models provide a streamlined approach to cloud adoption. This trend underscores the evolving preferences of cloud customers who seek comprehensive solutions that reduce complexity and enhance the overall value proposition of their cloud investments. The growing prevalence of CIPS is poised to shape the future landscape of cloud service offerings, aligning with the increasing demand for integrated and efficient cloud solutions.
Overarching Trends and Insights
Steady Growth in Cloud Infrastructure Spending
The overarching trend from Gartner’s forecast is the steady and substantial growth in cloud infrastructure spending across various service categories. While SaaS remains the dominant cloud service, IaaS and PaaS have experienced notable convergence and parallel growth. A significant factor driving this growth, particularly in the IaaS segment, is likely the increased deployment of AI servers. Additionally, the analysis suggests a strong customer preference for bundled cloud services, with the CIPS model gaining traction.
Despite removing management and security services and BPaaS from the public dataset, Gartner’s projections still indicate robust growth across all primary cloud service categories. However, DaaS stands out as the least successful segment, with minimal adoption and growth prospects. The insights drawn from this analysis highlight the dynamic nature of the cloud services market and the evolving preferences of businesses as they navigate their digital transformation journeys. As the cloud landscape continues to evolve, these trends are expected to guide the strategic decisions of enterprises and cloud service providers alike.
Conclusion
The projection for cloud infrastructure spending over the next couple of years shows notable growth, influenced by significant increases in Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) revenues. The forecast illustrates a positive trajectory for cloud services, suggesting that businesses are increasingly investing in these technologies. This trend is underscored by recent analysis and predictions from Gartner, a well-known IT market research firm.
Gartner’s data not only highlights the considerable expansion in IaaS and PaaS sectors but also provides insights into the broader trends affecting various cloud service categories. The emphasis is on how these sectors are evolving and what factors are driving their growth. IaaS, with its scalable computing resources, and PaaS, offering essential development tools, are becoming crucial for businesses aiming for agility and innovation. The data suggests that the shift towards cloud computing is accelerating, with more companies recognizing the benefits of these technologies for enhancing operational efficiency and competitive advantage.
