Cloud still accounts for small proportion of global IT market

Cloud computing has long been touted as the most important and influential technology to enter the market in recent years, although the latest figures from IDC suggest that it currently generates a tiny fraction of the total amount spent on IT each year.

The Register reports that analysts have forecast cloud spending to hit the equivalent of £98 billion worldwide over the course of 2017. This equates to around 5% of all IT spending combined, which is expected to reach £1.9 trillion this year.

The calculations made by analysts factor in software as a service (SaaS), infrastructure as a service (IaaS) and also platform as a service (PaaS), since these are the three pillars of the cloud market in its current form.

SaaS is still generating the most activity, making up 60% of spending in 2017 based on current analyst predictions. But while it may remain dominant for the time being, the rate of growth in this particular segment is much lower than seen elsewhere.

PaaS has a smaller stake at the moment, but is expected to expand at an average annual rate of 32.2% over the course of the coming half-decade. IaaS is also continuing to grow, with its own CAGR estimated at 30.1%.

If cloud spending continues to increase as anticipated, then in 2020 the market will be worth just over £163 billion annually.

This means that the cloud will still make up a compact corner of the IT market, but will be outdoing any other area in terms of the rate of spending growth, which ties in with claims that it could one day dominate spending entirely.

While the cloud may be seen as a technology which provides services to businesses and end users without the need for additional investment in hardware, from the provider side of the equation there is an ongoing struggle to invest in data centre infrastructure and ensure that there is enough capacity available to accommodate the rapid growth.

Another recent IDC report indicated that the amount being invested on the hardware required to host public cloud computing services will reach a little over £4 billion in 2017. This sounds like a lot, but when measured against the total IT hardware spend is still capable of dwarfing it.

As with the overall state of cloud spending in comparison with the wider IT market, the current scale of cloud hardware spending is less relevant than the rate of growth that it is undergoing. The impact of cloud computing has led to businesses reining in spending on in-house hardware and even on the development of private cloud infrastructures, resulting in a decline in this segment.

Globally, the IT market will grow by around 0.3% over the next five years, with 80% of spending being generated by businesses.

A quarter of this total will be attributable to firms with fewer than 10 employees on their books, while large organisations with more than 1000 members of staff will account for 45% of the market.

Businesses in finance and manufacturing are especially influential in this area, with 30% of all IT investment being made by organisations operating across these industries. North America will remain dominant, ahead of Western Europe and Asia, although the biggest growth in spending will be seen in South America, as emerging economies rise to prominence.

Although hardware spending still accounts for the majority of the market at the moment, this will have changed by 2020 when software will be the key stimulator of IT revenues, influenced no doubt by how important cloud computing has become.