Posted by: drmiw | January 26, 2009

Cloud computing market size forecasts

Is Cloud Computing a storm in a marketing teacup or will it go the way of the last ‘next big thing’? In January 2009 one of my fellow BCS Elite Group members posted the following question about it on LinkedIn: Is it here to stay and how big will the market become within the next 3 years? So I quickly answered the question in this blog post, and in October 2011 I finally returned to add a new section below with some more recent forecasts, and I compared these with the forecasts from 2008, which was quite revealing…

My initial answer to the cloud computing market size question

I’ve written before about the drivers for cloud computing in the credit crunch, but I haven’t backed up my words with third party numerical predictions for market penetration so I did some Googling and here is what I found:

  • In a May 2008 research note entitled “The Cloud Wars: $100+ billion at stake”, Merrill Lynch analysts wrote that by 2011 the volume of cloud computing market opportunity would amount to $160bn, including $95bn in business and productivity apps (email, office, CRM, etc.) and $65bn in online advertising.
  • In an October 2008 IT forecast IDC predicted that over the next five years spending on IT cloud services will grow almost threefold, reaching $42 billion by 2012 and account for 9% of revenues in five key market segments. More importantly, spending on cloud computing will accelerate throughout the forecast period, capturing 25% of IT spending growth in 2012 and nearly a third of growth the following year.

But can you ever trust what analysts predict? From past experience, no, but I think that the current bubble of interest in cloud computing will grow and last a good while, whereas the very similar ASP marketing bubble quickly popped and disappeared. Yes, there are strong drivers, the market conditions are in its favour and the technologies are maturing fast; but the main reason for my faith in the future of cloud computing is its name. The word ‘cloud’ stirs the imagination, conjures up mental pictures, and when customers are inspired to imagine they are more likely to change.

October 2011 update – new cloud market forecasts

Different analysts estimate the present and future size of the cloud computing market differently, of course, but it’s no surprise, given the depressed state of the financial markets, if the numbers in October 2011 are not quite what Merrill Lynch and IDC predicted in 2008. Here then are some new predictions:

So Merril Lynch’s 2008 prophecy of a $95 billion SaaS Market in 2011 has not materialised, and IDC have downscaled their predictions significantly since then, too, but the latter are in agreement with their rivals, Ovum and Markets and Markets, regarding a three-fold growth (if not the current size!) of the public cloud computing services market in the next four to five years. However, Ovum’s prediction of a significant drop in the proportion of the market that is SaaS-related (from 87% to 62%) certainly disagrees with IDC’s prediction of only a slight shift in SaaS’s share of the cloud market (from 77% to 74%) so it will be interesting to see who got that right. Will there be a significant move from SaaS to PaaS?

Now, I haven’t read through the analysts’ latest reports myself, so this blog post deals only with headline figures that are generally released but I know a lot of web searches land on this page so I decided to update it. I wish you the best of luck with your own research!

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Responses

  1. I understand the dilemma but do you have a better way to establish the size of the market. These anlysts have been doing this for amny years and all of them have got their own modelling tools and techniques.

    It is upto us to decide whom to abide by and whom to reject.

    • Hi Vishal,

      The measuring and forecasting of market sizes is currently a black art, I agree, and when we’re talking about something like cloud computing where there are myriad definitions it becomes even more difficult. That’s why we tend to rely on research companies like Gartner to define what a market is and to use the tools and techniques they trust to produce verifiable market data and indicative answers to marketing questions. There may be a better way but I don’t know of one, I’m sorry to say.

      Thanks for your question and comments.

      Mark

  2. Vishal
    A thought provoking piece. You’re right to say that you have to define before you can size and forecast. Cloud Computing is the hottest marketing subject in our industry today. For me it needs to encompass ‘C’ as well as IT. My current definition is:
    “For market-sizing purposes Cloud Computing encompasses all ITC offerings (products or services) which are used for the consumption or delivery of remote, browser-accessed applications – the delivery of which comes from data centre resources unknown to the ultimate end-user. Typically Cloud Computing applications are purchased on a pay-as-you-go basis and can be accessed by industry standard client devices such as PCs and Smart Phones. Specifically excluded are applications requiring local processing and storage, client server computing and interactive processing. Single-customer applications are not excluded as long as the delivery mechanisms have been adjusted.”
    I missed Fran Gen’s sizing acivity in my last months at IDC. However I’ve built a wrokable model and have published sizing and forecasts for the UK. I also have numbers for 19 other major countries if you’re interested.
    Best Wishes
    Martin
    ITCandor

    • Martin,

      Thanks for your definition and the link to your forecasts, and I would indeed be interested in the numbers you have for other countries.

      Thanks again,

      Mark


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