Private, Government Spending On Cloud Services Set To Skyrocket
By Christine Kern, contributing writer
In a forecast, released this month, International Data Corporation (IDC) predicts that overall public IT cloud services spending will reach $56.6 billion in 2014 will top $127 billion by 2018. IDC points out this is a 22.8 percent CAGR (compound annual growth rate) for the five-year period— about six times the growth for the IT market overall. IDC predict Software-as-a-Service (SaaS) will account for 70 percent of the spending this year, and Platform-as-a-Service (PaaS), driven by developer cloud services adoption and Big Data solutions will be the fastest growing category.
In a press release, the IDC cites “cloud first” strategies from both IT solutions providers and end users as a driver of the market. In addition, IDC says cloud services is entering an “innovation stage” that will result in new solutions and value-adds. Frank Gens, senior VP and chief analyst at IDC, says, “Many of these solutions will become more strategic than traditional IT has ever been. At the same time, there will be unprecedented competition and consolidation among the leading cloud providers. This combination of explosive innovation and intense competition will make the next several years a pivotal period for current and aspiring IT market leaders.”
In September, IDC Government Insights studied government cloud investment and predicted federal cloud spending is set to increase from a little more than $3 billion in 2014 to almost $10 billion by 2018. The IDC predicts over half of that spending will be dedicated to private cloud storage, followed by public cloud, with a much smaller amount being dedicated to community cloud or hybrid cloud services.
In an eCommerce Times article, Shawn McCarthy, a research director at IDC, says, “The main reason we believe that growth will continue is that cloud is proving to be a cheaper solution in some cases for government agencies. For that reason alone, some will make the switch — although that kind of commitment should not be made without a detailed return on investment analysis.”
The article also details spend by category. Federal private cloud services expenditures are predicted to reach $5.9 billion — or 60 percent of total cloud funding — by FY2018, with growth driven by the government's need meet specific IT security standards. Meanwhile, hybrid IT cloud services are targeted to reach $135.1 million in FY2014, followed by a decline in the market to $118.8 million by FY2018.
Spend for community IT cloud services is anticipated to top $406.9 million in FY2014, jumping to $868.9 million by FY2018. Growth in this sector will come from traditional shared services solutions, focused around specific Federal Enterprise Architecture (FEA) Business Reference Models. And in terms of public IT cloud services, government spend is estimated at $173.3 million in FY2014 and over $3 billion by FY2017, and provide low-risk solutions such as hosted websites and public information content storage. The Defense Department is the leading consumer of public cloud, spending approximately $90 million per year between 2013 and 2015.