The market for cloud infrastructure is now so large that it is very difficult for it to change drastically. But given the fact that people can turn off server, storage, and networking capacity as easily as they can turn it on, predicting how much money the world will spend on cloudy infrastructure can be tricky.
But, that is why the big IT market researchers get paid the big bucks, and the prognosticators at Gartner have just released their forecast for cloud infrastructure spending for 2024, which is nearly done, and for 2025, which all of us will be eager to get started with in a few weeks after much jubilation and relaxation.
What is interesting about the ongoing Gartner cloud forecast is that its researchers keep peeling higher level cloud services out of the forecast, at least in the dataset it shows to the public. Last year, Gartner took cloud management and security services, which was projected to drive $50 billion in revenues in 2024, out of the dataset. And this time around in the December forecast, Gartner is extracting cloudy business process as a service (BPaaS), which was projected to drive $82.3 billion in revenues out of the mix. These two elements have not been merged into other “as a service” categories such as Platform as a Service or Software as a Service (SaaS) software services – the changes in these categories are little wiggles compared to those tens of billions of dollars. Gartner is just not talking about these two categories this way anymore.
In the latest cloud spending forecast, Gartner says that spending on raw Infrastructure as a Service (IaaS) compute, storage, and networking capacity will be lower than it was expecting back in the spring. Back in May, Gartner was projecting for a tad more than $180 billion in IaaS revenues worldwide in 2024, and now it is saying it is more like $169.8 billion. That is still 21.3 percent growth, mind you, so don’t feel bad for the cloud builders. We think that AI servers represent a lot of this growth – and then some – and frankly we would not be surprised if a very large part of the nearly $70 billion in incremental IaaS spending between 2022 and 2024 come from AI servers. Gartner did not elaborate on this, and we think because it wants to sell you a report that does.
Since 2021, PaaS revenues have moved more or less in lockstep with and at the same spending level as IaaS, which is a neat thing to observe. Back in 2015, which is the oldest data we have from this Gartner dataset, IaaS drove $16.2 billion worldwide, which was 4.3X higher than the $3.8 billion spent on PaaS. In four years, PaaS spending grew at a much faster rate and nearly reached parity in 2019 and 2020, and in 2021, as the world changed thanks to the coronavirus pandemic, the two started to track.
The biggest portion of cloud sales from the beginning of the Gartner model back in 2015 has been SaaS, which is forecast to drive $250.8 billion in sales worldwide. The share of the cloud pie has stabilized at just north of 40 percent, but used to represent more than 60 percent a decade ago.
What has not taken off, what is not growing fast, and what we think will be removed from the conversation is Desktop as a Service, or DaaS, which represents a fraction of a percent of total cloud spending across these four categories. It makes just as much logical sense to have a our PCs running in the cloud and accessed from cheap client computers that have more modest power requirements as it does to have PCs with fat CPUs and GPUs as well as big main and flash storage running locally.
But very few of us want to have a virtual PC running in the cloud, and we want to be able to do real work with real compute locally even if it might be better, cheaper, or easier to have a dumb surfboard with pretty graphics as our main client. DaaS has been a dud, and about the only thing that might change this is a corporate mandate to use cloudy PCs. We do not suspect this will happen.
Add it all up, and cloud services spending as defined by IaaS plus PaaS plus SaaS plus DaaS will come to $595.7 billion, up 19.2 percent.
Looking ahead to 2025, Gartner now says that IaaS spending will rise by 24.8 percent to $211.9 billion. while PaaS will rise by 21.6 percent to $208.6 billion and SaaS will rise by 21.6 percent to $299.1 billion. Sprinkle in $3.85 billion in DaaS spending, and the cloud services total in 2025 looked like $723.4 billion, up 21.4 percent.
By the way, we assume that in this dataset that Gartner is not undercounting IaaS and PaaS services and is extracting any underlying IaaS out of PaaS revenues and any underlying IaaS and PaaS out of SaaS revenues. This is the only thing that makes sense in those cases where the underlying costs are bundled into the price of the higher-level service sold on the cloud.
Gartner has started tracking spending when IaaS and PaaS services are bought as a bundle, which it calls cloud infrastructure and platform services, or CIPS. In 2022, CIPS represented 70 percent of total, combined IaaS and PaaS revenues, which is an interesting statistic, and in 2024 it will be 71 percent and in 2025 it will be 71.6 percent, according to Gartner.
More than two third and heading towards three quarters of raw infrastructure and platform services are sold together, and in the long run, this is what “cloud” will mean. If you pick a cloud, you not only pick its preferences for servers and storage and networks, but you pick its platform. And we have been saying all along that Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba Cloud, Tencent Cloud, and Oracle Cloud are full platforms in their own rights, and are every bit of a platform as were or are IBM mainframes and minicomputers, Sun Microsystems and Hewlett Packard RISC/Unix machines, or Wintel and Lintel X86 servers.
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