Enterprises are rapidly adopting public cloud IaaS (Infrastructure as a Service) as an alternative to on-premises hardware infrastructure.

According to the results of a survey conducted by IT market analysis and consulting firm IDC ( www.idc.com ) targeting over 6,000 companies worldwide, two-thirds of the respondents said they are already using public cloud IaaS or plan to adopt it within 2016. Global public cloud IaaS revenue, which was $12.6 billion in 2015, is projected to reach $43.6 billion in 2020, showing an average annual growth rate of 28.2%.

Deepak Mohan, Director of Public Cloud Storage and Infrastructure Research at IDC, stated, “The importance of public cloud services as enablers of business agility and speed is becoming increasingly prominent,” adding that this is causing changes in IT infrastructure spending while implying shifts for leading vendors in the enterprise infrastructure technology sector. Director Mohan further explained, “The growth of public cloud IaaS is creating new service opportunities in the adoption and utilization of public cloud resources,” noting that public cloud IaaS is gradually transforming the enterprise IT value chain alongside changes in infrastructure, architecture, and operations layers.

The public cloud IaaS market grew by 51% in 2015. IDC projected that this high growth rate of approximately 41% would continue through 2016 and 2017. However, as enterprises shift from the 'exploration phase' to the 'optimization phase,' growth is expected to slow slightly after 2017. Meanwhile, as alternative services such as managed private cloud mature and become available, they are expected to provide more options to IT organizations planning infrastructure changes.

For many companies, hybrid infrastructure, which combines cloud infrastructure with existing IT infrastructure, is becoming the optimal path for adopting public cloud IaaS. In fact, hybrid cloud infrastructure has already become a common pattern among large enterprises, and IDC predicts that 80% of IT organizations will adopt hybrid architecture by 2018.

From a global perspective, numerous public cloud services have emerged by region over the past two years, most of which are based on OpenStack. OpenStack is lowering barriers to new cloud services and facilitating their deployment. IDC anticipates that public cloud service providers in each region will continue to grow due to regulatory and data sovereignty issues, and expects a gradual increase in demand for domestic alternatives to global public cloud service providers.

The public cloud IaaS market is currently dominated by a few large service providers, such as Amazon, while smaller service providers form the long tail. In 2015, the top 10 IaaS vendors accounted for 56% of revenue and 59% of absolute growth. Due to economies of scale and continued investment, the market dominance of leading companies is expected to continue over the next five years.