It’s a great time to be a cloud computing operator as spending in the cloud market grows. Enterprises spend nearly $80 billion per quarter on cloud infrastructure, with no signs of slowing down. Researchers project that the global market will reach almost $800 billion in 2024 and double by 2028.
Cloud adoption has been on the rise for several years. Still, the explosive growth of AI is driving a significant portion of the spending on these technologies. The year-on-year growth rate for the last three quarters exceeds 20%. Although the expenditure might fluctuate over the next few years, the overall market trends indicate that spending will remain high for at least the next four years.
The Role of AI in Cloud Spending
Enterprise spending on cloud services has maintained a fairly consistent upward trend over the last few years, with the lion’s share of the spending going to the big three providers (Amazon’s AWS, Google, and Microsoft). Those three companies represent about two-thirds of the total cloud market.
The most significant factor in the marked increase in spending is AI. As more companies embrace the potential of AI for task automation, increased efficiency and productivity, and cost savings, the demand for cloud-based AI solutions increases. Including AI in a cloud migration strategy helps the transition go more smoothly by reducing the risk of human error and making the process more accurate and reliable.
Simply put, cloud computing is the backbone of AI, ensuring that companies can leverage powerful tools without the investment in physical hardware or software. Although some simple tools, like an AI-powered assistant, don’t require significant storage capacity, more substantial projects requiring access to millions of data points require more resources. In response, AWS, Google, and Microsoft are making substantial investments to increase the capacity of their data centers and create language model marketplaces.
In short, the widespread adoption of AI in enterprises has the potential to drive unprecedented growth over the next five years, with some experts predicting a 50% compound annual growth rate.
Where Companies Are Spending on Cloud Computing
The majority of spending in the cloud market in the coming years will be on data management and AI platform solutions and service providers. Continued hyperscale expenditures, as companies increase their cloud computing capacity to meet the demand for AI technologies, will also continue to drive the spending spree.
Further breaking down cloud market spending, most will continue to be in Software as a Service (SaaS), comprising about two-fifths of the total market. Enterprises will increase their reliance on cloud-based services to support integral functions.
The remaining cloud market spending will likely be split between Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). These cloud services ensure enterprises have the computing, storage, and networking resources necessary to maintain operations. The real-time business insights that cloud-based services can provide, the cost savings driven by reduced hardware and maintenance costs, and increased reliability and scalability mean that spending will continue for the foreseeable future.
