It’s great to be in the public cloud business these days. Research firm IDC is predicting public cloud services spending in Asia Pacific (APAC here excludes Japan according to the firm) to reach US$48.5 billion in 2021.
The firm explains the growth as the new normal with businesses adjusting and reinventing themselves for both pandemic preparedness and competitiveness. As economic activities return to pre-COVID levels, majority of enterprises are building new technology enabled business models, with a focus to regain growth and have a technological edge over the competitors.
A look back at cloud spending
Cloud has emerged as a core foundation of this renewed tech focus, leading to APAC public cloud services spending growth of over 38% to $36.4 billion in 2020, per the latest update of the IDC Worldwide Public Cloud Services Spending Guide.
“Cloud services have addressed more than cost management challenges during the COVID-19 pandemic. Cloud services and technologies have been the basis for the rapid introduction of new digital services to support remote workers and online customers, and it’s been the speed of implementation and low up-front costs that have enabled that,” said Chris Morris, vice president for APeJ Cloud & Partner Ecosystems research at IDC Asia/Pacific.
Cloud purchases by type
At 48% cloud infrastructure as a service (IaaS) tops the overall public cloud spend in 2020. IDC expects this to remain unchanged during the forecast period. IaaS spending across compute, storage, and networking will remain steady throughout the forecast with compute taking the major share of spending followed by storage.
Software as a Service (SaaS) is positioned as the second largest in terms of spending on cloud with a share of around 40%. The majority share of SaaS spending is coming from enterprises spending on cloud-hosted applications. Software Applications and System Infrastructure Software (SIS) are also contributing to SaaS spending. This is expected to further grow as enterprises leverage SaaS solutions that cover collaboration, productivity, and security to support remote working and innovations.
Third on the list is Platform as a service (PaaS) with a 11% share in 2020 with Data Management Software leading the charge. IDC says PaaS will record a five-year CAGR of 41.2% during 2019-2024. IDC expects this trend to continue due to focus on business scalability, increased performance, security, and optimizing operations to create business resiliency and cap infrastructure costs.
Drivers of cloud adoption
“COVID-19 made us realize that no business is 100% invulnerable, however enterprises who were ahead on the digital transformation curve were able to sustain operations during the pandemic and recover well from the crisis than the laggards. During this time, cloud services became the underpinning technology, integrated with technologies such as DevOps, AI and BDA. Organizations were able to reimagine their business by continuously innovating and delivering to the end user,” added Ashutosh Bisht, senior research manager at IDC Asia/Pacific.
Concept of cloud reliability, scalability, availability, reduced Capex Spend, and most importantly security is driving enterprises in the region to migrate to public cloud services with a renewed enthusiasm.
Cloud buyers by industry
Professional Services (15% share), Banking and Discrete Manufacturing (around 10% share each) are the top three industries accounting for one-third of the overall public cloud services spending throughout the forecast period of 2021-24.
Construction (being the conventionally laggard) and Professional services (due to increased focus on external facing interactions and customer experience) will see the fastest growth in public cloud spending with a five-year CAGR of 39% and 35% respectively.
Cloud buyers by size of business
Very large businesses (more than 1000 employees) will account for 37.1%, medium-sized businesses (100-499 employees) will deliver around 30.2%, and finally large businesses (500-999 employees) with 20.8% will be the three segments that will account for the APAC total 2020 public cloud spending.
Both small and medium size business show the fastest growth during the forecast period of around 34% in cloud investment as they were the hardest hit by pandemic and with the immediate need for business continuity, resiliency and growth.
Cloud buyers by geo
On a geographical perspective, China will be the largest market for public cloud services in 2020 with its $19.4 billion spend that will account for about 53.4% of APAC total. Openness of enterprises to adopt cloud technology supplemented by government initiatives and presence of home-grown cloud service providers is boosting the adoption. Australia ($5.2 billion) and India ($3.5 billion) will be in second and third place respectively in terms of cloud spending in the region driven by fast adoption across enterprises and presence of major global cloud providers of this technology in the region.