KPN Ventures Research Series: Market Insight — Cloud Computing

Digital transformation to the cloud allowed companies to lower their IT costs significantly, enhance their continuity of operations, obtain the most up to date technology standards, collaborate freely and reduce maintenance efforts. But for the technology to reach mass adaption, it requires businesses to ask critical questions such as: how can we migrate our legacy on-premise infrastructure to the cloud? Is the cloud beneficial in terms of costs spending? What is the impact of pivoting from a capital expenditure model to a recurring OPEX model?

The worldwide cloud market is growing steadily, from $182.4B in 2018 to an expected $331B in 2022 (a CAGR 2018–2022 of 16%). Enterprises are increasingly migrating to the public cloud in a phased manner via a combination of public/private cloud and on-premise (hybrid-cloud). In 2018, 85% of the companies are already operating in a hybrid-cloud environment, which is expected to grow towards 98% in 2022. The most significant segment within the cloud market is Software-as-a-Service (SaaS) being deployed via a cloud infrastructure with market size of $85.1B in 2018. However, the Infrastructure-as-a-service (IaaS) segment is expected to grow the fastest with a CAGR of 26% from 2019 to 2023.

In terms of the competitive landscape, AWS, Microsoft (Azure), IBM and Google Cloud are leading the way as cloud infrastructure providers. The overall situation is that of a commodity scenario, thereby competing on price leveraging the economies of scale by adding additional volume. However, there is not a “winner takes it all”, and new companies are entering the industry rapidly. Consequently, there is an evident opportunity for new entrants focusing on specific verticals and/or providing value-added services built on top of the more general/commoditized cloud offering.

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