Global IaaS market grew by 31% in 2018 as enterprise demand for public cloud continues to soar

The global infrastructure-as-a-service (IaaS) market continues to grow rapidly as its largest players take market share and revenue growth away from the smaller, more niche cloud providers, Gartner data shows.

The analyst house’s annual look at the worldwide IaaS market suggests little changed in who the major players were in the sector in 2018, with Amazon Web Services (AWS) continuing to lead the market, followed by Microsoft, Alibaba, Google and IBM.

The amount of revenue generated by firms operating in the IaaS market was up 31.3% in 2018 compared with the previous year, equating to a rise from $24.7bn in 2017 to $32.4bn a year later.

The proportion of this revenue that can be attributed to the big five has also risen year on year, from less than 73% in 2017 to nearly 77% in 2018, according to Gartner, suggesting that their continued growth is coming at the expense of the market’s smaller players.

And this trend looks set to continue, said Sid Nag, research vice-president at Gartner, because the smaller players are unable to keep up with the datacentre expansion plans capabilities of their larger competitors.

“Despite strong growth across the board, the cloud market’s consolidation favours the large and dominant providers, with smaller and niche providers losing share,” said Nag.

“This is an indication that scalability matters when it comes to the public cloud IaaS business. Only those providers who invest capital expenditure in building out datacentres at scale across multiple regions will succeed and continue to capture market share. Offering rich feature functionality across the cloud technology stack will be the ticket to success as well.”

The latter point is often cited as one of several reasons why AWS continues to dominate the IaaS market so strongly, with Gartner’s data suggesting the firm banked $15.5bn in revenue in 2018, up 27% on the previous year.

“The largest of the IaaS providers, Amazon, accounts for nearly half of the total IaaS market,” said Gartner. “It continues to aggressively expand into new IT markets via new services, as well as acquisitions, growing its core cloud business.”

Microsoft’s revenue has also grown year-on-year from $3.1bn 2017 to $5bn in 2018, while Alibaba experienced the biggest year-on-year growth spurt of all the providers at 92.6%, which Gartner attributed to its “aggressive R&D investments” and financial capabilities.

Google clocked up year-on-year revenue growth of 60.7% between 2017 and 2018, and Nag flagged up the firm as one to watch over the coming years, as its senior leadership team continues to work on bolstering the enterprise readiness of its platform.

“Google’s cloud offering is something to keep an eye on, with its new leadership focus on customers and shift toward becoming a more enterprise-geared offering,” he said.