Before you start reading this article, we would like to clarify that here we are talking about ‘cloud service revenue’ and not ‘cloud revenue’. Cloud services revenues refer to the revenue generated by companies offering cloud services, including infrastructure, platforms, software applications, and other cloud-based solutions. It includes income from subscription fees, usage-based charges, service-level agreements, and value-added services; meanwhile, cloud revenue represents the overall revenue companies generate from their complete range of cloud-related activities. This includes revenue from cloud services, infrastructure, software sales, consulting, professional services, and other cloud-related business activities.
What is a cloud service market?
The ‘cloud services market’ refers to the industry that provides various computing services, including storage, software, infrastructure, and platforms, over the Internet. Cloud services enable businesses and individuals to access and utilize computing resources and applications without needing on-premises infrastructure or physical hardware.
In the cloud services market, service providers deliver these resources and services to users on demand, typically on a subscription basis. The services are hosted and managed by the providers responsible for the underlying infrastructure, security, maintenance, and updates. Users can access these services remotely, often through web browsers or dedicated applications, from any location with an internet connection.
Now that things are clear, we back jump back to the main topic.
The International Data Corporation (IDC) reports that the global public cloud services market generated a revenue of $545.8 billion in 2022, marking a 22.9% increase from the previous year. Software as a Service – Applications (SaaS – Applications) led the way, contributing over 45% of the total revenue. Infrastructure as a Service (IaaS) followed with 21.2%. PaaS and SaaS – SIS represented 17.0% and 16.7% of the total, respectively.
Now while we’re on the topic of revenues, Microsoft CEO Satya Nadela sets an ambitious plan to double the organization’s revenue to $500 billion by 2030.
Microsoft, Amazon Web Services, Salesforce Inc., Google, and Oracle, the top 5 public cloud service providers, secured more than 41% of the market share, achieving a remarkable year-over-year growth rate of 27.3%. Microsoft maintained its lead with a 16.8% share, followed by Amazon Web Services at 13.5%.
While the overall market grew by 22.9%, revenue for foundational cloud services supporting digital-first strategies grew by 28.8%. This indicates the increasing reliance of enterprises on cloud platforms for innovation. IDC predicts continued growth in foundational cloud services, particularly IaaS and PaaS elements, as businesses accelerate their digital transformations.
IDC’s Dave McCarthy emphasized the investments made by cloud providers in high-performance infrastructure, driving market growth and enabling the migration of enterprise applications and the deployment of AI software.
The report also revealed that organizations consider their public cloud provider as their most strategic technology partner. Prioritization of PaaS developers and data services, along with adopting AI-enabled applications, is rising.
According to Frank Della Rosa of IDC, SaaS – Applications remain the largest segment of the cloud software market, projected to surpass $547 billion by 2023. Della Rosa highlighted the potential of AI advancements in next-generation SaaS applications to enhance personalization, customer experience, and operational efficiency while redefining various industry markets.
While a few companies lead the foundational cloud services and SaaS – Applications markets, there is still a significant presence of cloud service providers globally. The top five companies in the foundational cloud services market account for 75% of revenues, offering targeted PaaS services and cross-cloud governance. In the SaaS – Applications market, nearly two-thirds of spending comes from outside the top five companies, reflecting customers’ focus on specific outcomes.