IDC forecasts the foundational cloud service market to grow revenue at 28.8% CAGR

A new forecast from IDC estimates annual recurring revenue derived from foundational cloud services will increase from under $100 billion in 2020 to over $300 billion in 2025 with a compound annual growth rate of 28.8%.

According to IDC (International Data Corporation), organisations use of the cloud is moving to the next level of maturity, spurring the adoption of a cross-functional set of services to drive innovation in a digital-first economy. It says these foundational cloud services (FCS) for compute, data, and app frameworks will drive competitive development across the whole cloud market.

"Digital is now a permanent yet dynamic fixture in our world, built on the digital infrastructure and platform technologies of a cloud foundation," says IDC group vice president, Worldwide Research, Rick Villars.

"When organisations want to pursue a digital-based capability or intelligently leverage data to their advantage, they can do so as they have rapid access to the foundational cloud services offered by the leading cloud services providers."

IDC defines foundational cloud services as the Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and System Infrastructure as a Service (SISaaS) markets, where the top eight public cloud services providers (Amazon Web Services, Microsoft, Google, Alibaba Group, IBM, Tencent, Huawei, and Oracle) held a combined market share greater than 60% in 2020.

These include the following key service portfolios:

• Compute services: Virtualised x86 compute, bare metal compute, block storage, accelerated compute, other compute, and software-defined compute software.
• Data services: Data management systems, object storage, file storage, and event stream processing software.
• App framework services: Integration software, deployment-centric application platforms, and AI lifecycle software.
• Usage multiplier services: Low or no-fee services that encourage greater or more effective use of high-value services by making it easier to adopt, connect, deploy, track, secure, and update those services. This includes load balancing and DNS, as well as marketplaces and bundles of open source software solutions.

Combined, the services within these portfolios accounted for more than half of all IaaS, PaaS, and SISaaS revenue in 2020 and are expected to grow to more than two-thirds of all revenue in 2025.

IDC expects organisations will adopt a range of strategies for embracing FCS portfolios. It says some will select a primary FCS partner, while others will choose more diversified cloud deployment strategies. Regardless of the FCS strategy selected, IDC believes enterprises will prioritise extensions to a providers' FCS portfolio in the areas of expanded service deployment options (edge, network, and core), automated governance services (manage, optimise, secure), and robust partner ecosystems.

"Demand for FCS is increasing, indicating the providers in these areas are meeting customer expectations," says IDC research director, Platform-as-a-Service, Lara Greden.

"However, this is no time to rest. In a market characterised by rapid innovation, FCS providers must continually prove they're willing to invest in innovation at a high level. Customers are seeking outcomes, not technology solutions.

"The key will be to differentiate, build mindshare, and redefine portfolios by use cases," she adds.