"The market for public cloud services is continuing to demonstrate high rates of growth across all markets and Gartner expects this to continue through 2017," said Sid Nag, research director at Gartner, in a statement. "This strong growth continues to reflect a shift away from legacy IT services to cloud-based services, due to increased trend of organizations pursuing a digital business strategy."
Given that IT budgets are growing at a rated of 1% to 3%, cloud services is one of the fastest growing segments of IT,” said Zeus Kerravala, an analyst with ZK Research. “Traditional packaged software is having about 3% growth, so cloud is five times that. The cloud just greatly simplifies IT but also enables businesses to move faster.”
While there’s solid growth showing across public cloud services, Gartner noted that the highest growth this year is coming from infrastructure as a service, or IaaS, which is expected to have 38.4% growth in 2016. The analyst firm forecasts that the IaaS market segment should reach $22.4 billion by the end of the year.
"IaaS continues to be the strongest-growing segment as enterprises move away from data center build-outs and move their infrastructure needs to the public cloud," Nag said. "Certain market leaders have built a significant lead in this segment, so providers should focus on creating differentiation for success."
Cloud application services, or SaaS, are also expected to show an upswing with 20.3% year-over-year growth, reaching $37.7 billion. Cloud management and security services, with 24.7% growth, and cloud application infrastructure services, known as PaaS, also is strong this year with an expected 21.1% growth.
According to Kerravala, this kind of public cloud growth should continue over the next five to seven years.
“I think we're still in the beginning of the cloud era,” he said. “I think we're likely to continue to see companies shift their strategies away from on-premise to the cloud. Lots of companies fear the cloud because of security issues, but I think those fears dissipate and as more companies grow confidence, that will continue to fuel the cloud market.”