Australia's cloud services market will skyrocket to $4.55 billion by 2018

Australia’s cloud services market will continue to grow at an increasingly rapid pace over the next five years, says Frost and Sullivan.

The market was worth $1.23 billion in 2013 and is set to be worth $4.55 billion by 2018.

The $1.23 billion is a combination of revenue generated from software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS).

Findings from the latest Frost and Sullivan report states the Australian cloud computing market has emerged from the early adopter stage and is now in the early growth stage of adoption by the wider market. The report shows the strong growth in cloud adoption will continue in 2014 and will taper off as the market reaches a higher state of maturity.

However, for the next five years the market is expected to grow strongly, averaging a compound annual growth rate (CAGR) of 30 percent from 2013 to 2018, says Harpur. IaaS and PaaS will grow at faster rates than SaaS, through this is from much lower bases.

The demand for cloud services is increasing due to the higher use of data intensive applications. These applications require the use of back-end cloud applications for storage and analysis.

Potential cost savings is another key reason more businesses are moving to the cloud, says Frost and Sullivan.

Organisations have reported an average cost saving of 12 percent in the field of IT, through the use of cloud computing services.

Hiring IT staff comes with a high cost, so a growing proportion of IT requirements are being outsourced and IT departments are shrinking in size and number, says Phil  Harpur,  Senior  Research  Manager,  Australia & New Zealand, Frost and Sullivan.

Frost and Sullivan surveyed IT decision makers in Australia and found cloud services enable easier access to IT resources from any location, provides faster access to data for applications such as data analytics, frees up resources from other tasks and improves business redundancy.

“Two thirds of companies that have adopted cloud services believe it has significantly improved their overall business performance. A significant proportion of organisations feel it has enhanced their ability to innovate and explore new business models. The Education, Mining and in particular, Government  and Financial Services, have been strong adopters of cloud over the  last six to 12 months. The Retail and Manufacturing sectors are seeing strong adoption of cloud based business management applications,” says Harpur.

There are still concerns when it comes to cloud services, says Frost and Sullivan. Many companies are hesitant to move to the cloud due to apprehension about security and giving away control over key business processes and data.

Harpur says the dynamic nature of the cloud environment makes it more vulnerable to security threats and IT security requirements increase in complexity. Furthermore, risks in disaster recovery and back up of cloud services, customisable options and internal management of cloud services are matters that need to be fully addressed.

Even so, cloud applications are the catalyst for the evolving role of IT within organisations. Half of organisations feel the decision making process is shifting from the CIO and IT department to individual business units such as HR, payroll, collaboration and conferencing, and this will continue to mature over the next five years.