2018 public cloud capital expenditures set to top $160bn (before nearly doubling by 2021)

US to spend the most over the year with China set to leap ahead of the UK, Germany, and Japan into the number 2 position by 2021.

Adoption of public cloud architectures shows no signs of slowing down as the latest market forecasts suggest the sector is set to grow 23.2% in 2018 from 2017, reaching $160bn in revenues.

According to International Data Corporation (IDC) Worldwide Semiannual Public Cloud Services Spending Guide, expenditures are, however, expected to slow somewhat over the 2016-2021 forecast period, with the market forecast to achieve a five-year compound annual growth rate (CAGR) of 21.9% with public cloud services spending totalling $277bn in 2021.

During 2018, the discrete manufacturing sector is expected to cash out the largest percentage of the global $160bn forecast at $19.7bn.

This is followed by the professional services sector ($18.bn), and banking ($16.7bn). The process manufacturing and retail industries are also expected to spend more than $10bn each on public cloud services in 2018.

Analysts expect these five industries to remain at the top in 2021 due to their continued investment in public cloud solutions.

The industries that will see the fastest spending growth over the five-year forecast period are professional services (24.4% CAGR), telecommunications (23.3% CAGR), and banking (23.0% CAGR).

Eileen Smith, program director, Customer Insights and Analysis, IDC, said: “The industries that are spending the most are the ones that have come to recognise the tremendous benefits that can be gained from public cloud services.

“Organisations within these industries are leveraging public cloud services to quickly develop and launch 3rd Platform solutions, such as big data and analytics and the Internet of Things (IoT), that will enhance and optimize the customer’s journey and lower operational costs.”


Tech & Geo spend

With the world’s largest industries heavily investing in their public cloud networks, the largest portion of that capital expenditure is forecast to be put towards Software as a Service (SaaS), capturing nearly two thirds of all public cloud spending in 2018.

SaaS spending, which is comprised of applications and system infrastructure software (SIS), will be dominated by applications purchases, which will make up more than half of all public cloud services spending through 2019. Enterprise resource management (ERM) applications and customer relationship management (CRM) applications will see the most spending in 2018, followed by collaborative applications and content applications.

Infrastructure as a Service (IaaS) will be the second largest category of public cloud spending in 2018, followed by Platform as a Service (PaaS).

“IaaS spending will be fairly balanced throughout the forecast with server spending trending slightly ahead of storage spending,” analysts wrote.

PaaS spending will be led by data management software, which will see the fastest spending growth (38.1% CAGR) over the forecast period. Application platforms, integration and orchestration middleware, and data access, analysis and delivery applications will also see healthy spending levels in 2018 and beyond.

In terms of geography, the United States will be the largest country market for public cloud services in 2018 with its $97bn accounting for more than 60% of worldwide spending.

The United Kingdom and Germany will lead public cloud spending in Western Europe at $7.9bn and $7.4bn respectively, while Japan and China will round out the top 5 countries in 2018 with spending of $5.8bn and $5.bn, respectively.

IDC predicts China to experience the fastest growth in public cloud services spending over the five-year forecast period (43.2% CAGR), “enabling it to leap ahead of the UK, Germany, and Japan into the number 2 position in 2021”.

Argentina (39.4% CAGR), India (38.9% CAGR), and Brazil (37.1% CAGR) will also experience particularly strong spending growth.

Ashutosh Bisht, research manager, Customer Insights and Analysis, IDC, said: “Digital transformation is driving multi-cloud and hybrid environments for enterprises to create a more agile and cost-effective IT environment in Asia/Pacific.

“Even heavily regulated industries like banking and finance are using SaaS for non-core functionality, platform as a service (PaaS) for app development and testing, and IaaS for workload trial runs and testing for their new service offerings.

“Drivers of IaaS growth in the region include the increasing demand for more rapid processing infrastructure, as well as better data backup and disaster recovery.”