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May 2nd, 2013

Gartner predicts that the worldwide public cloud services market will top $131 billion for 2013, an 18.5% increase over 2012′s $111 billion. The largest segment is cloud advertising at 48% of the total market (2012), but infrastructure as a service (Iaas) is the fastest growing.

Cloud apps

In 2012, IaaS—cloud storage, computing, and printing services—grew 42.4%, reaching $6.1 billion, and is expected to hit $9 billion in 2013. Here’s the complete breakdown of cloud services and their share of 2012 revenues:

  • Cloud advertising; 48%
  • (BPaas) business process services, second-largest market segment after advertising; 28%
  • (Saas, Software as a Service) application services; 14.7%
  • (IaaS) system infrastructure services; 5.5%
  • Management and security services; 2.8%
  • (PaaS, Platform as a Service) application infrastructure services; 1%

The various cloud services segments are separated by large gaps and are growing at different rates, so it is actually a bit early to tell what the relative sizes will be in a mature industry. Despite this uncertainty, there is clearly strong and growing demand for every kind of cloud service. Part of this is because the business decision to use cloud services is as clear as the one that leads companies to rent laptops for conferences and temporary projects—it lets you avoid the expense of hardware purchases and the hassle of repairs, maintain at least 99% uptime, and watch everything just work. Cloud service providers make some of the very same arguments.

Global market growing

When Gartner looks at the global cloud services market, it finds that emerging regions—North Africa, Asia, the Middle East, Latin America, etc.—have high growth, but smaller markets. (The exception is China, which is both large and growing.) Conversely, more mature regions—Europe, North America, Japan, the mature Asian/Pacific economies—have larger markets, but low growth. When entering a new foreign market, Apple, like many successful firms, uses cross-cultural marketing techniques to reach the particular nations and cultures involved. Viewing each country or region with regard to its unique cultures, languages, and traditions is just good business, which is why Apple does it for everything from the MacBook to the iPhone. Generally speaking, cloud service providers entering a foreign market will succeed to the degree that they succeed at this.

First, of course, cloud service providers must recognize the opportunity that is beyond the U.S., Canada, and Mexico. Of the total world spending on new cloud services from now through the end of 2016, Gartner expects the North American market to account for 59%, Europe 24%. Smaller markets—led by “Greater China,” Indonesia, India, Argentina, Mexico, and Brazil—may account for fewer dollars in spending, but will achieve higher growth rates. Gartner’s chief of research, Ed Anderson, advises the many cloud service providers to serve the mature markets while reaching out to the emerging ones “to capitalize on the high growth of these regions, particularly Latin America and Greater China.”

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