Global SaaS Market 2014 – 2018 – Continues to drive growth in Cloud Computing Market

Global Software as Service market is expected US$53 billion by 2018, or 59 per cent of the enterprise public cloud computing market from the current 2013 revenues of US$23.2 billion, according to Juniper Research and also expects the overall enterprise cloud computing market to reach US$90.7 billion by 2018. According to Forrester Research, the total public cloud services market revenues were US$58 billion in 2013, is expected to grow to $72 billion in 2014 and expected to reach US$191 billion by 2020. Software as a Service (SaaS) solutions accounted for $36 billion in revenue in 2013. SaaS market has reached significant maturity levels and well established in several application categories like sales force automation, customer relationship management, human resource management, eProcurement and ePurchasing, replacement of existing licensed software. Cloud platforms, led by Amazon Web Services LLC, with revenues of $4.7 billion in 2013 but traditional IT partners IBM, HP and Microsoft are fast catching up with their own set of offerings and market is becoming highly competitive. The other two segments of cloud computing Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are also expected to continue growth. But these two segments face certain critical issues in terms of data security, compliance and portability. “Both PaaS and IaaS will experience significant growth over the forecast period as new applications, developed specifically for the cloud to harness workloads such as big data analysis, benefit from the PaaS ‘fast-track’ model,” Juniper says.

According to San Diego-based investment firm Software Equity Group, SaaS software revenues will contribute around 25% of the overall software market in the next five years. Research firm Gartner estimated that global spending on SaaS will reach $22.1 billion by 2015. Some software vendors are converting their software delivery and revenue models to SaaS, while others acquire SaaS companies to gain access to this market. SaaS offerings are predominantly based on subscription models where enterprise customers access the software in the cloud by paying monthly subscriptions which is totally different from the traditional software license and maintenance models where customers have to pay large upfront perpetual license fee. With the emergence and development of networking equipment, platforms and access devices like smartphones and handheld devices, SaaS based on subscription model is picking up and customers can easily access data and applications form anywhere, at any time, on any device. Despite this there are certain concerns for CIOs who are not totally adopting the SaaS model as there are security concerns, switching costs, regulatory concerns and also cloud outages and failures too. Adoption of cloud based models is further expected to grow in the next five years as the technologies mature and more applications and services are offered on the cloud. Companies too need to rethink their IT investment strategy as Cloud Computing offers a significant level of cost savings in terms of IT infrastructure investments.

Global IaaS Industry 2011& Forecast 2014-2016 – Slow adoption by large Enterprises

Infrastructure as a Service is a cloud computing model in which the service provider owns the equipment (Hardware like Storage, Servers, Networking Equipment, etc.  & Software) and is responsible for housing, running and maintaining it and the client typically pays on a per-use basis.  Major players in the IaaS market include Leaders like Amazon Wen Services, Savvis, CSC, Terremark, Bluelock; Challengers like Navisite, Opsource, IBM, GoGrid; Visionaries like Rackspace, Joyent and Niche players like Hosting.com, Tier3, AT&T, Tata Communications, SoftLayer, iland, Carpathia Hosting, Datapipe and Virtacore Systems, according to Gartner Magic Quadrant December 2011. Gartner predicts IaaS is a fast growing market as players like Google & Microsoft entered this market and in future this market will be 1/3^rd of the hosting market. Gartner also forecasts the IaaS market will generate $24.4B in revenue in 2016 from $5.6B in revenue in 2011 and IaaS is expected to grow by over $20B with a CAGR of 41.7% in the forecast period globally. The Compute sub segment is expected to see the greatest revenue growth globally, growing from $3.3B in 2011 to $20.2B in 2016, generating a 43.2% CAGR and other two sub segments CAGR growth - Storage (36.6%) and Print (16%).

Forrester predicts that IaaS market will initially grow for next few years but the market is expected to decline in the long term. Forrester’s report, “Sizing the Cloud”, highlights that IaaS is the second largest public cloud category with a $2.9 billion market size and “IaaS will reach a peak of $5.9 billion in global revenues in 2014 and will then enter a period of significant commoditization, price deterioration and margin pressure and between 2014 and 2020, as a result, the IaaS market will first stagnate and then decline, with total market revenues of $4.8 billion in 2020,” according to Forrester analysts Stefan Ried and Holger Kisker. Yankee Group analysts suggest IaaS might represent $2 billion to $3 billion, globally. IDC also estimates IaaS will decline to $15 billion in 2014 and most of the analysts believe the IaaS market will be larger than the PaaS market and IaaS is one of the most talked about in the cloud space, which saw several important improvements, such as changes in pricing strategies, the appearance of new smaller players, and the entrance of some technology heavyweights.

Enterprise Strategy Group survey published in January 2012 highlights that of more than 600 enterprise and mid-market companies globally; only 27% said they were using public cloud IaaS services. That's up 10% from a similar survey published in early 2011. But 28% of respondents said they have no immediate plans to jump into the cloud, and another 24% said they haven't pulled the trigger on a cloud deployment yet, but plan to at some point in 2012. SMBs are at the forefront of IaaS adoption totally for IT infrastructure needs but large enterprises are selective in adoption and using public IaaS primarily for these specific use cases: R&D projects, load testing, move non critical legacy applications from expensive on premise to off premise, build & deploy new apps and as part of SaaS or PaaS usage. With some of the large enterprises that selectively adopted IaaS couple of years back and who effectively utilized it are becoming test cases for more large enterprises to adopt IaaS within their organizations. There are also concerns that the pricing has not fallen for some time till now but with the entry of more players particularly Large IT players, businesses can expect more choice of offerings and reduction in prices.

Global SaaS, PaaS, IaaS and BPaaS Market 2011 and Forecast

Cloud computing includes Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Business Process as a Service (BPaaS). SaaS is the highest level of the cloud and includes actual cloud applications. SaaS segment is the largest segment in the overall Cloud Computing Market. Customer relationship management (CRM), Content, communications and collaboration (CCC) market and Enterprise resource planning (ERP) revenue are the key sub segments respectively. North America, followed by Europe is the key markets for SaaS. Asia Pacific and Latin America are key growth markets too. Adoption is being driven by availability of on demand software, understanding of the model, increasing interest and pressure on IT managers to reduce costs. Data security concerns, outages, lack of understanding of the cloud and infrastructure, and integration with existing infrastructure are concerns. According to Gartner SaaS market is expected to reach $ 21.5 billion in 2015 from $12.1 billion in 2011. IDC estimates it to reach $ 40.5billion in 2014 from $ 21.8 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011. Google, Citrix, Salesforce.com, NetSuite are key players.

PaaS is the middle level and builds upon the IaaS layer and provides an application development platform for the cloud. Gartner says, PaaS products primarily supported application server capability, but the market has expanded to other middleware capabilities as a service, such as integration, process management, and portal and managed file transfers (MFTs). Gartner analysts said PaaS offerings are likely to expand the application integration and middleware (AIM) market by bringing in a new range of organizations that otherwise would have been packaged application and office software users. Vendors in this space include Windows Azure, Heroku and SalesForce’s Force.com. Salesforce.com has the most mature PaaS. According to Gartner PaaS market is expected to reach $ 1.8 billion in 2015 from $707.4 million in 2011. Forester estimates it to reach $9.8 billion in 2015 from $820 million in 2011.

IaaS is the lowest level of the cloud technology stack. It provides operating system support, storage and processing. Vendors in this sector include Google App Engine and of course Amazon’s (news,site) latest whipping boy AWS EC2. Infrastructure-as-a-service (IaaS) will shift from public clouds to virtual private clouds, Forrester Research projects. While adoption remains high, the size of the market will shrink and public cloud services will cost less in the future because the cost of inputs will continue to decline. According to Gartner IaaS market is expected to reach $ 22 billion in 2015 from $5.6 billion in 2011. IDC estimates it to reach $ 15 billion in 2014 from $ 3.4 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011.

BPaaS is even higher up than SaaS and it includes technology, people, process and smart analytics wrapped in a simple "pay-as-you-go" commercial model. It allows companies to minimize or eliminate substantial upfront costs.  BPO outsourcing providers such as India, China and Latin America will likely make a play in this area. Traditional BPO providers are setting up data centers to offer cloud computing services to their clients and Cloud computing inclusive of BPaaS provides a big opportunity for service providers. According to Gartner BPaaS market is expected to reach $ 133.5 billion in 2015 from $71.7 billion in 2011. Forester estimates it to reach $3 billion in 2015 from $530 million in 2011.