Page 41 - DIY Investor Magazine - Issue 23
P. 41

        As often happens with disruptive technologies, we appear to have hit an adoption sweet spot – having taken 10 years to reach the first $10bn in revenue (2006-2016), IaaS is now adding $10bn revenue every 1-2 years.
While growth must invariably slow at some point, the market is expected to sustain growth rates of around 30-35% which (at the higher end of forecasts) means the IaaS market could be worth as much as $150bn by 2023. SaaS has also continued to deliver strong growth over the past year and is forecast to expand by more than 20% annually to c$235bn by 2023.
The IaaS market is rapidly forming around a handful of companies. A year ago, research firm Gartner produced an IaaS ‘magic quadrant’ of 15 leading cloud companies; this year there are just six.
Gone are the telcos and managed service providers leaving three vendors who – thanks to their massive scale – deliver high levels of performance, fault toler- ance and availability. Of these, AWS has an estimated 61% market share and Azure 23%.
The three largest providers are also using technology to improve their own operations. Google applies machine learning to improve the energy efficiency of its data centres; AWS uses it to forecast capacity demand and how to best meet it.
Enormous and technologically sophisticated IT com- panies including IBM and Oracle have been unable to make much of a dent in the cloud computing market, which points to formidable barriers to entry.
This time last year, we suggested that the public cloud accounted for c21% of workloads, and a year on the process of ascertaining cloud penetration remains highly uncertain. CIO surveys suggest that it remains at or around 22% headed to 29% next year and 50% by the end of 2022.
However, other measures put it at less than 20% today growing to 28% by 2022. A further complication is that as cloud offerings continue to broaden and deepen so more uses are found for the cloud and the total addressable market expands again.
This leave a lot of room for conjecture. For example, Gartner sees the opportunity at more than $1trn while KeyBanc believes nearer $1.8trn is up for grabs. Fortunately, either scenario should provide plenty of runway to sustain cloud growth well into the next decade.
IT budgets continue to be reallocated away from legacy areas such as hardware and infrastructure software in favour of cloud, cybersecurity and workflow automation.
This will continue to weigh on and work against incumbents such as Dell, Oracle and HP and in favour of cloud vendors such as Amazon, Microsoft and Google.
           41 DIY Investor Magazine | Oct 2019

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