01-03-13 | Blog Post

Cloud Infrastructure as a Service (IaaS) Spending to Exceed $72 Billion by 2016

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According to a Gartner market analysis report on cloud services over 2012-2016, cloud infrastructure as a service (IaaS) spending will exceed $72 billion, with a compound annual growth rate (CAGR) of 42 percent.

Cloud infrastructure as a service (IaaS) providers offer virtual machines and supporting resources, including networks, firewalls, Internet connection, electrical/facility and other infrastructure needs. Additional managed services might include IT disaster recoveryoffsite backup, SAN-to-SAN replication and more managed by certified professionals.

A projected 19 percent CAGR in the Software-as-a-Service (SaaS) and cloud-based business application services from 2011-2016 ($13.4-32.2B) provides a healthy market to parallel expected cloud IaaS growth. [Read Global IT Spending, Cloud Computing & Top Growing Industries for a breakdown of each industry by IT spending opportunities]. Gartner reports the IaaS market to have grown from less than one-third of the SaaS market in 2011 to almost equal the size by 2016.

Public Cloud Services Market - IaaS Fastest-Growing Segment
Public Cloud Services Market – IaaS Fastest-Growing Segment

Cloud SaaS is a term for any application available via the Internet and hosted on a remote server. SaaS requires vendors to manage the application code and database, while the infrastructure is typically outsourced and managed by a data center operator/hosting provider (cloud IaaS provider).

Fronting capital expenses as well as managing and maintaining a cloud infrastructure requires more resources (personnel, budget, training, time, etc.) than a startup SaaS can afford or is willing to invest in. The article Key Benefits of Leasing vs. Building a Data Center provides a detailed list of the costs associated with building your own data center, including planning, design, property, fire suppression, permits, taxes and more. Power alone accounts for 70-80 percent of the total costs of running a data center, and can vary in costs by region.

Gartner’s cloud services provider landscape includes a basic economic theory predicting that the strong demand from customers met by numerous cloud service offerings will create a growth market that not only increases the adoption of cloud services, but also effectively lowers prices for consumers; further fueling demand.

The Six Benefits of Cloud Computing describes how lower costs can be achieved with the cloud through “optimizing the use of the sum of the computing resources and delivering better efficiency and utilization of the entire shared infrastructure.”

Other benefits include eliminating capital expenses associated with building server infrastructure, faster project deployment, greater scalability, resiliency and redundancy, and more. Read more here.

With the growth of the IaaS market comes the influx of cloud providers. One way to distinguish a quality provider is to compare updated audit reports of their data centers and cloud hosting solutions, including SOC 2 and SOC 1 (SSAE 16) reports that measure the security, availability, privacy and financial reporting controls of a service provider. Find out what else to look for by reading What to Look for in a Cloud Hosting Provider.

Read our Cloud Computing Wiki to get informed on private cloud hosting, managed clouds, cloud security, cloud disaster recovery and more.

Or read our cloud computing case studies of real companies with real cloud solutions, including a private cloud case study and an e-commerce software as a service (SaaS) case study.

Related Cloud Computing Articles:
2013 IT Spending Trends – Cloud Computing, Mobile and Big Data Projects
How the Cloud is Changing the Data Center’s Bad Reputation for Energy Inefficiency
Advancing Michigan Business with Cloud Computing

Forecast Overview: Public Cloud Services, Worldwide, 2011-2016, 2Q12 Update (PDF)

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