IaaS Market Ruled by Four

The IaaS market is growing strong, buoyed by cloud and digital transformation initiatives. It is also dominated by four IT giants.

According to Gartner, the worldwide IaaS market grew 29.5% in 2017 to total USD 23.5 billion, up from USD 18.2 billion in 2016.

Amazon led the pack, followed by Microsoft, Alibaba, and Google. IBM was named the fifth vendor.

While the IaaS market experienced robust growth, it is also showing consolidation among the top four hyperscale providers – Amazon, Microsoft, Alibaba, and Google. They accounted for approximately 73% of the total IaaS market and 47% of the combined IaaS and infrastructure utility services (IUS) market.

"The top four providers have strong IaaS offerings and saw healthy growth as IaaS adoption is being fully embraced by mainstream organizations and as cloud availability expands into new regions and countries," Sid Nag, Research Director, Gartner said.

Amazon leads with an estimated USD 12.2 billion revenue in 2017, up 25% from 2016. Gartner noted that it is also the most mature, enterprise-ready provider, with the strongest track record of customer success and the most useful partner ecosystem.

Microsoft secured the number two position in the IaaS market with growth of more than 98% on its IaaS offering, led by its Microsoft Azure offering, with revenue surpassing USD 3.1 billion in 2017. 

Alibaba grabbed third place by growing 63%, showcasing the firm’s success in research and development. Gartner noted that Alibaba has the financial capability to continue growth and invest in global expansion, allowing the firm to position itself as an alternative hyperscale cloud provider in some regions.

“This reflects a fundamental change in what and how organizations are consuming technology. Some legacy infrastructure offerings, such as IUS, are seeing lower and slower uptake that impacts the combined IaaS and IUS market," Nag said.

"Additionally, a groundswell of demand for cloud-skilled personnel is forcing technology providers to change how they compete to meet this exploding demand," he added.

Cloud migration continued to be a key driver in 2017. "Cloud-directed IT spending now constitutes more than 20% of the total IT budget for organizations using cloud. Many of these organizations are now using cloud to support production environments and business-critical operations," Nag said.

However, the research firm noted that transformational digital business projects are beginning to impact IaaS growth positively.