Cloud Vendor Revenues Hit $148 Billion in 2016

Though many were eager to say goodbye to 2016, cloud vendors and operators are likely hoping 2017 brings more of the same, at least when it comes to revenue growth.

According to a new Synergy Research Group report, operator and vendor revenues for the four quarters ended September 2016 reached $148 billion, which represents 25 percent revenue growth on an annualized basis.

The report shows that the two cloud service segments with the highest growth are Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), at 53 percent.

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Hosted private cloud infrastructure services had annualized revenue growth at 35 percent, and enterprise Software as a Service (SaaS) at 34 percent.

Amazon Web Services (AWS) and Microsoft were the big winners in IaaS and PaaS, while IBM and Rackspace were market leaders in hosted private cloud infrastructure. In terms of enterprise SaaS, Salesforce and Microsoft came out on top.

In 2016, spend on cloud services overtook spend on cloud infrastructure hardware and software, according to Synergy. “In aggregate cloud service markets are now growing three times more quickly than cloud infrastructure hardware and software,” the report says.

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Synergy notes that investments in infrastructure by cloud service providers paid off; CSPs generated almost $30 billion in revenues from cloud infrastructure services (IaaS, PaaS, hosted private cloud services) and over $40 billion from enterprise SaaS.

“We tagged 2015 as the year when cloud became mainstream and I’d say that 2016 is the year that cloud started to dominate many IT market segments,” Synergy Research Group’s founder and Chief Analyst Jeremy Duke said in a statement. “Major barriers to cloud adoption are now almost a thing of the past, especially on the public cloud side. Cloud technologies are now generating massive revenues for technology vendors and cloud service providers and yet there are still many years of strong growth ahead.”

Synergy says that “UCaaS, while in many ways a different type of market, is also growing steadily and driving some radical changes in business communications.”

A recent report by Gartner said that overall IT spending will reach $3.5 trillion in 2017, with software and IT services spending to grow 7.2 percent and 4 percent, respectively.