Public cloud end-user spending is set to nearly reach $600bn in 2023, Gartner says

Cloud drives digital business transformation through emerging technologies, such as AI

Worldwide end-user spending on public cloud services is forecast to grow 21.7 per cent to total $597.3bn in 2023, up from $491bn in 2022, according to the latest forecast from Gartner.

Cloud computing is driving the next phase of digital business, as organisations pursue disruption through emerging technologies like generative artificial intelligence (AI), Web3 and the metaverse.

"Hyperscale cloud providers are driving the cloud agenda," said Sid Nag, vice president analyst at Gartner.

"Organisations today view cloud as a highly strategic platform for digital transformation, which is requiring cloud providers to offer more sophisticated capabilities as the competition for digital services heats up.

"For example, generative AI is supported by large language models (LLMs), which require powerful and highly scalable computing capabilities to process data in real-time," added Nag.

"Cloud offers the perfect solution and platform. It is no coincidence that the key players in the generative AI race are cloud hyperscalers."

According to the research, all segments of the cloud market are expected see growth in 2023.

Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2023 at 30.9 per cent, followed by platform-as-a-service (PaaS) at 24.1 per cent.

Gartner predicts that by 2026, 75 per cent of organisations will adopt a digital transformation model predicated on cloud as the fundamental underlying platform.

"The next phase of IaaS growth will be driven by customer experience, digital and business outcomes and the virtual-first world," continued Nag.

"Emerging technologies that help businesses interact more closely and in real time with their customers, such as chatbots and digital twins, are reliant upon cloud infrastructure and platform services to meet growing demands for compute and storage power."

While cloud infrastructure and platform services are driving the highest spending growth, SaaS remains the largest segment of the cloud market by end-user spending.

SaaS spending is projected to grow 17.9 per cent to total $197bn in 2023.

"The technology substrate of cloud computing is firmly dominated by the hyperscalers, but leadership of the business application layer is more fragmented," said Nag.

"Providers are facing demands to redesign SaaS offerings for increased productivity, leveraging cloud-native capabilities, embedded AI and composability - particularly as budgets are increasingly driven and owned by business technologists. This change will ignite a wave of innovation and replacement in the cloud platform and application markets."