The importance of networking to and within cloud environments has grown significantly for enterprise customers as more and more applications, workloads, and data are moved to the cloud. IDC estimates that worldwide revenue for public cloud-based infrastructure as a service (IaaS) networking services will reach US$19.4 billion in 2023. The market is expected to see strong growth through 2026 with a compound annual growth rate (CAGR) of 27.9% for the period from 2022 to 2026.
"IaaS network services play a critical role in helping organisations build modern digital IT and business capabilities that have all the cloud characteristics of agility, flexibility, resilience, elasticity, and scalability," said Taranvir Singh, research manager for Cloud Networking Services, IDC.
IDC defines IaaS networking as public cloud-based IaaS network services in which all the network infrastructure and services are elastic and on demand. They are provisioned and consumed just like other cloud services.
Segment opportunities
The five major segments of the IaaS networking market included in IDC's research are direct cloud connects/interconnects, cloud WAN (transit), ADCaaS (IaaS load balancing), IaaS service mesh, and cloud VPNs (to IaaS clouds).
The largest segment of the IaaS networking market is cloud connects/interconnects, which account for more than half of all revenue and is forecast to expand at a 21.1% CAGR. The second-largest technology segment, cloud WAN (cloud middle-mile and core transit networks), is also forecast to be the fastest-growing category with a five-year CAGR of 112.3%.
IaaS service meshes will see strong growth as well, with a CAGR of 68.2% while ADCaaS (Application Delivery Controller As A Service) and cloud VPNs will experience more modest growth with CAGRs of 17.5% and 11.8% respectively.
"Cloud connects/interconnects are foundational to every cloud strategy as these make it possible for enterprises to quickly and securely connect their on-premises and edge environments to IaaS providers," said Rohit Mehra, group vice president, Network and Telecommunications at IDC.
"The rise of multi-cloud and SaaS applications that meet the demands of the modern distributed workforce in enterprises is the driver of rapid growth in cloud WANs and other IaaS network services."
Rohit Mehra
IaaS cloud providers have recognised the importance of networking with their customers and have invested heavily to expand their dedicated IaaS networking solutions, which have become integral, complementary assets to their core IaaS compute and storage offerings.
Adoption of these services is driven by customer propensity to adopt network infrastructure and services, which have cloud-like networking capabilities and are consistent with the organisations' hybrid and multi-cloud strategies.
Competitive landscape
In 2022, the top 5 vendors in the public cloud IaaS market (Amazon Web Services, Microsoft, Google, Alibaba, and Tencent) were also the leaders in the IaaS cloud networking market, making use of their existing technical expertise and infrastructure capabilities.
Combined, the top 5 IaaS cloud networking services providers accounted for 85.7% of the total market spend in 2022 with AWS capturing more than half the total.
