The cloud computing market can be a dense and confusing market for investors. The industry jargon can be opaque, and companies' cloud-based growth can be tough to grasp beyond simple revenue figures.
In a previous article, I explained some of that jargon and highlighted three key cloud stocks -- Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Salesforce (NYSE:CRM). Today, I'll review 10 key industry stats that should give investors a better grasp on the growth of the cloud computing market.
1. The worldwide cloud computing market grew 21% to $110 billion in 2015 according to Synergy Research Group. That total includes cloud infrastructure services, software services, and hardware.
2. 17% of enterprises run over 1,000 VMs (virtual machines) in the public cloud, compared to 13% in 2015, according to RightScale's State of the Cloud survey. That's great news for public cloud leaders like Amazon and Microsoft.
3. Worldwide spending on public cloud services could double from almost $70 billion in 2015 to over $141 billion in 2019, according to research firm IDC. IDC expects Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) solutions -- like Amazon's AWS and Microsoft's Azure -- to grow faster than Software as a Service (SaaS) platforms.
4. The IaaS/PaaS markets are often dubbed the "cloud infrastructure" market. IaaS spending -- fueled by the growing need for remote computing power and storage -- could rise from $38 billion this year to $173 billion in 2026, according to Forbes.
Spending on PaaS, which is often overshadowed and merged with IaaS solutions, could hit $7.5 billion by 2020 as developers create more applications within the cloud, according to Global Industry Analysts. 50% of PaaS spending could be focused on the Internet of Things (IoT) market by 2020, according to Gartner.
5.The SaaS market is led by companies like Microsoft and Salesforce. Their cloud-based services -- like Office 365, Skype, Dynamics CRM, and Salesforce's sales, service, data, and marketing clouds -- compete in a more saturated market than large scale infrastructure platforms like AWS and Azure.
6. 31% of enterprises run over 1,000 VMs in the private cloud, compared to 22% last year, according to RightScale. This indicates that this market, which mostly serves larger companies which need to keep their data on-site, is still growing -- which benefits private cloud leaders Dell's VMWare (NYSE:VMW), HPE, IBM, and Cisco.
7. However, most companies don't simply choose a public or private cloud solution. 18% of respondents in RightScale's survey only used a public cloud, while a mere 9% relied completely on a private cloud.
8. 71% of respondents use hybrid cloud platforms, compared to just 58% last year. Hybrid platforms keep more recent data on-site, while moving older data to the public cloud.
That's an ideal setup for companies that aren't ready to move all their data off-site. Public cloud leaders like AWS integrate with third-party private clouds to become hybrid platforms, while private cloud leaders like VMWare also integrate with other public clouds.
9. The biggest challenge for the cloud market today is a lack of resources and expertise, according to RightScale. 32% of respondents felt that their IT departments were poorly equipped to handle the growing workloads in the cloud, compared to 27% in 2015.
10. The average company uses about 1,427 cloud-based services, according to Skyhigh Networks. Facebook (NASDAQ:FB) is the most popular cloud-based social media service in the workplace, Office 365 is the top collaboration platform, and Dropbox is the top file-sharing service.Those figures explain why Facebook is expanding into enterprise networking with Workplace, and why Microsoft is challenging Slack on the collaboration front with Skype Teams.
The key takeaway
You don't have to be a techie to understand the cloud computing market. But you should understand the differences between IaaS, PaaS, and SaaS platforms and identify the market movers and leaders in each category.
From there, it's basically a matter of gauging which companies are growing the fastest and claiming the most market share. Therefore, investors shouldn't be intimidated by the cloud computing market -- they should recognize it as one of the best long-term investment opportunities in the tech sector today.
Editor's note: This article has been corrected to note Skyhigh Networks' number that the average company uses about 1,427 cloud-based services.