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Forrester Research Inc., 2016
(Forrester Research Inc., 2016)

Public-cloud services will grow at a compounded annual rate of 22 percent between 2015 and 2020, reaching $236 billion, research firm Forrester said in a note this week.

That total is 23 percent higher than Forrester forecasted in 2014, with the increase attributable to increases in demand for all three major forms of cloud computing: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). Each involves accessing computing resources over the internet rather than installing them on the premises.

“Public cloud services are the biggest disruption in the tech market in the past 15 years — and adoption is accelerating,” the Forrester report said.

Meanwhile, the cloud has “decimated” sales of on-premises servers and storage, Forrester said in the report.

North American and European companies will be running 18 percent of their custom-built apps on the public cloud by next year. SaaS from Salesforce, Workday, Netsuite and others “crushed” sales of conventionally licensed apps, and vendors of the latter are rapidly converting them to SaaS or acquiring SaaS vendors.

Forrester divides the cloud market into three segments:

  • IaaS and PaaS together will reach $64 billion by 2020, accounting for 27% of public-cloud revenues, an area led by Amazon Web Services, Microsoft, IBM, Google, Salesforce, and AliCloud.
  • Cloud “middleware” — online database management, integration, file management and communications — will hit $14 billion by 2020, up from $4 billion last year, and will account for 6 percent of the total.
  • SaaS revenue will grow to $162 billion by 2020, from $71 billion last year, accounting for 67 percent of the total.

In 2014, the cloud was still a complement to systems and applications, but now the move toward the cloud as a replacement is “well underway,” Forrester said. Even though more cloud means more servers, the total number of servers needed will decline, and the market for servers will essentially stagnate. The report notes:

In the past two years, companies have started to deploy cloud resources as a replacement for internal systems in much higher numbers. For example, swapping out SAP HR systems with a Workday HR system or replacing on-premises servers and storage arrays with cloud-based compute and storage services.

(Forrester Research Inc., 2016)
(Forrester Research Inc., 2016)

CIOs should be making the public cloud their first choice to complement or replace existing systems, but SaaS does present the risk of lock-in, so contracts should be kept to two or three years, Forrester advised.

But even in 2020, the average company’s tech portfolio will be a mix of existing systems, SaaS apps and other cloud services.

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