The Rich Parfait That Is Cloud Spending
November 9, 2022 Timothy Prickett Morgan
Most IBM i shops are so used to having an integrated system that runs their mission critical systems of record and some of their systems of engagement and Web infrastructure workloads, too, that they may forget that the rest of the world does not always experience their IT in this relatively monolithic way.
The top 50,000 or so organizations in the world tend to take a best-of-breed approach to every application and its underlying layers of infrastructure, so they have a hodge-podge of stuff. The next million or so organizations have to be more conservative and keep the infrastructure diversity down to a roar. And the next tens of millions of organizations are certainly dependent on IT, but they tend to pick a platform or two and do a few to a dozen applications and that is about all they can handle even though they may need more sophistication to better run and expand their businesses.
Here is the one thing they have in common: In one way or another, they are all either considering or are already using some sort of cloud infrastructure or software. And it seems like a large portion of the world’s IT budget is going to be spent on various kinds of cloud services. According to the market researchers at Gartner, we are talking about an absolutely tremendous amount of money, as you can see:
Gartner’s forecasts and revisions in cloud spending for past years keep growing as it gets a better and better handle on this, and if you go back into the archives of data, the changes are quite large. For instance, in its November 2020 cloud numbers Gartner figured the world would consume $257.5 billion in cloud services, which would grow by 18.2 percent to just under $305 billion in 2021 and grow by 18.8 percent to $362.3 billion in 2022. In the April 2021 casing of the cloud market, Gartner pegged revenues across all kinds of cloud services at just over $270 million for 2020, and reckoned they would grow by 23.1 percent to $332.3 million in 2021 and then grow by another 19.6 percent to $397.5 percent in the 2022 forecast. And here we are a year later, and Gartner is now saying there was actually $412.6 billion in cloud spending worldwide in 2021, is reckoning there will be $490.3 billion when this year is done (up the same 18.8 percent as in the forecast a year and a half ago) and will hit an astounding $591.8 billion in 2023 (up 20.7 percent).
We say this with humor as well as humility: At this rate, when the November 2023 forecast comes out, that 2023 spending level will be above $800 billion, and at this rate, cloud spending will consume all of IT services spending before too long.
Some things to think about in this layering of revenues by the type of cloud services out there, which may or may not reflect the layering of cloud services within your own organization someday if you go that route.
Obviously, infrastructure services – IaaS, or basic compute, storage, and networking – is the oldest school of cloud components and is akin to buying hardware on premises, and software services – SaaS, which is just application software running on someone’s cloud, whether they own it or not – is akin to renting software licenses for applications. Platform services, or PaaS, is a kind of indicator for those who still want to write their own software, and while PaaS is smaller than IaaS or SaaS, it is growing at just north of 23 percent in 2022 and 2023 in the latest forecast from Gartner and growing at a faster rate than SaaS but not growing at a faster rate than IaaS. Both PaaS users and SaaS software providers need to buy IaaS, of course, so their growth is combining to drive IaaS growth.
It would be interesting to know how much IaaS that SaaS and PaaS are driving directly and how much is just IaaS that companies are buying to run their own applications. What we can tell you is that the ratios of IaaS compared to PaaS and SaaS individually or together are shrinking as IaaS is growing faster.
We think this means that there are more companies doing their own thing out there on the cloud when it comes to applications. In other words, the cloud is becoming more like the do-it-yourself platform that the AS/400 and IBM i platform has always been for the majority of customers (65 percent or so) who create their applications and less like the 35 percent or so who just bought third party application software to run on the machine. This is comforting if true. It could also just mean that raw infrastructure services have been subject to inflation and higher level software services are not because of more intense competition between players.
It’s hard to say, but fascinating. What is clear is something interesting is going on, and it will affect lots of companies all over the world.
Desktop as a Service is still a relative dud and barely registers against the other cloud services, and it just goes to show you how end users want their own physical machines. The growth is impressive here for DaaS, mind you, but if you amortized PC sales across three, four, or even five years and stacked it up against annual DaaS revenues, DaaS is still noise in the data. But it may not stay that way. The next generation might not feel this way about client devices, particularly if networking becomes pervasive around the world with 5G and 6G or even 7G networks. They may have machines that are little more than a modem and a screen logging into edge networking devices running in cell base stations.
They want self-driving cars, why not edge virtual PCs? We personally don’t want either. But the future doesn’t belong to us.