Market Watch

Assessing Gartner’s Forecast: The Impact of GenAI on Cloud Spending

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Renowned firm Gartner predicts a whopping 20.4% hike in end-user spending on public cloud services by 2024, totalling a staggering $679 billion, an increase from the existing $563.6 billion spend this year. The surge in spending will be primarily driven by business requirements and breakthrough technologies such as generative AI, states Gartner.

Significantly, all the segments within the cloud market tracked by Gartner are expected to witness growth. Infrastructure-as-a-service (IaaS) is slated to see the most substantial surge in end-user spending at 26.6%, followed closely by platform-as-a-service (PaaS) at 21.5%.

Underscoring the importance of the cloud in the current tech landscape, Sid Nag, Vice President Analyst at Gartner said, “Cloud has become essentially indispensable. However, that doesn’t mean cloud innovation can stop or even slow. The tables are turning for cloud providers as cloud models no longer drive business outcomes, but rather, business outcomes shape cloud models.”

Providing the expected use-case he further elaborated, “For example, organisations deploying generative AI services will look to the public cloud, given the scale of the infrastructure required. However, to deploy GenAI effectively, these organisations will require cloud providers to address non-technical issues related to cost, economics, sovereignty, privacy and sustainability. Hyperscalers that support these needs will be able to capture a brand-new revenue opportunity as GenAI adoption grows.”

Gartner also identifies industry cloud platforms as being the driving force behind an increase in cloud spending. The analysts define these platforms as those that respond to ‘industry-relevant business outcomes by integrating underlying software-as-a-service (SaaS), PaaS and IaaS services into a whole-product offering with composable capabilities.’ An interesting forecast by Gartner is that by 2027, more than 70% of companies will use industry cloud platforms, a significant surge from less than 15% in 2023.

Elucidating on this, Nag added, “GenAI adoption will also support the growth in industry cloud platforms. GenAI models that are applicable across diverse industry verticals might require significant customisation, affecting scalability and cost-effectiveness. Public cloud providers can position themselves as partners in the responsible and tailored adoption of GenAI by building on the same approaches applied to industry clouds, sovereign clouds and distributed clouds.”

Despite the optimistic predictions for global end-user spending on public cloud services, in the UK, The Competition and Markets Authority (CMA) has launched a formal investigation into the UK cloud market based on concerns raised by telco regulator Ofcom. The regulator, however, refrained from naming Amazon Web Services (AWS), Microsoft Azure, and Google Cloud specifically, who collectively account for the majority share of the public cloud market.

“This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses just now totally rely on cloud services, making effective competition in this market essential,” said CMA chief executive Sarah Cardell. As the cloud market landscape undergoes these transformations, stay tuned for further updates and comprehensive insights.

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