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Feb 28 2017

IDC Cloud Computing Forecast Should Be a Wake-up Call for Software Companies

Crystal Bedell

Many companies continue to have concerns about moving their software products to the cloud. We understand. Transitioning to a SaaS business model is a big change that’s not without risk. But if you’re holding out because you think cloud is a passing fad or that your customers will continue to buy from you regardless of whether you’re on the cloud—then here’s your wake-up call.

In a recent update to its Worldwide Semiannual Public Cloud Services Spending Guide, analyst firm IDC predicts that overall cloud spending will experience a 21.5% compound annual growth rate (CAGR) from 2015 to 2020. That’s nearly seven times the rate of overall IT spending growth. And guess what organizations are buying?

That’s right: Software as a Service.

Spending on Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) will grow even faster than SaaS with five-year CAGRs of 30.1% and 32.2%, respectively.

According to IDC, SaaS will remain the dominant type of cloud computing service, capturing nearly two-thirds of all public cloud spending in 2017 and accounting for roughly 60% in 2020. IDC includes both applications and system infrastructure software in its SaaS spending predictions. Spending, however, will be dominated by application purchases, which IDC predicts will make up more than half of all public cloud spending throughout the forecast period.

Spending on Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) will grow even faster than SaaS with five-year CAGRs of 30.1% and 32.2%, respectively. We imagine the rapid growth is due to companies across every industry recognizing the benefit of moving their software to the cloud—whether it’s a homegrown app used internally or a commercial product from a software vendor.

 

Companies are turning to the cloud for features and capabilities they can’t get on-premises. “In 2017, discrete manufacturing, professional services and banking will lead the pack in global spending on public cloud services as they look for greater scalability, higher performance, and faster access to new technologies,” said Eileen Smith, program director, Customer Insights and Analysis.

IDC reports that the United States will be the largest market for public cloud services, generating more than 60% of total worldwide revenues throughout the forecast. Industries that will see the fastest growth in public cloud spending are professional services, retail, media and telecommunications. However, it’s worth noting that 18 of the 20 industries IDC includes in its Spending Guide will experience five-year CAGRs greater than 20%.

We think the opportunity for software companies is obvious. Businesses are clamoring for cloud-based software offerings, and if your product isn’t in the cloud, you’ll be missing out very soon. But you won’t just be missing out on potential revenue growth. As other software companies evolve and innovate around you, you’ll simply be left behind.

“As cloud adoption expands over the next four years, what clouds are and what they can do will evolve dramatically – in several important ways. The cloud will become more distributed (through Internet of Things edge services and multi-cloud services), more trusted, more intelligent, more industry and workload specialized, and more channel mediated. As the cloud evolves these important new capabilities – what IDC calls ‘Cloud 2.0’ – the use cases for the cloud will dramatically expand,” added Frank Gens, senior vice president and chief analyst at IDC.

The call to action is clear: Now is the time to move your software offerings to the cloud. The team here at RightBrain Networks is happy to help. Contact us at (800) 931-8354.

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