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Why the ‘tables are turning’ on cloud hyperscalers

"Cloud models no longer drive business outcomes, but rather, business outcomes shape cloud models," Gartner says

Oxygen staff by Oxygen staff
14 November 2023
in Market data
Why the ‘tables are turning’ on cloud hyperscalers

Image by G.C. from Pixabay

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“The tables are turning” for cloud providers, Gartner has asserted, despite predicting an increase in public cloud growth in 2024.

Public cloud growth has slowed in 2023 as end users switch their attention to optimising their cloud investments. The slowdown has even fuelled a backlog in uncommitted cloud spend, while market leader AWS‘ annual rate of growth decelerated from 33% to 12% between Q2 2022 and Q3 2023.

Gartner, however, predicts that market growth will accelerate modestly again in 2024, when it expects public cloud end-user spending to rise 20.4% to $679bn.

That compares with the 17.8% growth slated for 2023.

‘The tables are turning for cloud providers’

The fact that cloud has become “essentially indispensable” doesn’t mean that cloud innovation can slow, Gartner VP Analyst Sid Nag said, however.

“The tables are turning for cloud providers as cloud models no longer drive business outcomes, but rather, business outcomes shape cloud models,” he said.

“For example, organisations deploying generative AI (GenAI) services will look to the public cloud, given the scale of the infrastructure required.

“However, to deploy GenAI effectively, these organisations will require cloud providers to address nontechnical issues related to cost, economics, sovereignty, privacy and sustainability. Hyperscalers that support these needs will be able to capture a brand-new revenue opportunity as GenAI adoption grows.”

IaaS to grow fastest

Infrastructure as a Service (IaaS) is set to light up the market with the highest growth by cloud sub-segment in 2024, with end-user spending forecast to bulge 26.6% to $182bn.

Cloud application services (SaaS) will remain the largest sub-segment, Gartner said, with spending set to rise from $205bn to $244bn year on year.

Cloud desktop-as-service (DaaS) will see spending rise from $2.8bn to $3.2bn, meanwhile, cloud application infrastructure services (PaaS) from $145bn to $176bn and cloud business process services (BPaaS) from $66bn to $73bn.

“GenAI adoption will also support the growth in industry cloud platforms,” Nag added.

“GenAI models that are applicable across diverse industry verticals might require significant customisation, affecting scalability and cost-effectiveness. Public cloud providers can position themselves as partners in the responsible and tailored adoption of GenAI by building on the same approaches applied to industry clouds, sovereign clouds and distributed clouds.”

Tags: featuredGartner
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