IaaS market will reach $19.4bn in revenue in 2023 - IDC

Networking to and within cloud environments is growing for enterprise customers according to IDC

IaaS market will reach $19.4bn in revenue in 2023 - IDC

Worldwide revenue for public cloud-based infrastructure as a service (IaaS) networking services will reach $19.4bn (£15.13bn) in 2023, according to estimates from the International Data Corporation (IDC).

The market is expected to see strong growth in the coming years with a compound annual growth rate (CAGR) of 27.9 per cent 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 of cloud networking services at 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. 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 accounts for more than half of all revenue and is forecast to expand at a 21.1 per cent 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 per cent.

IaaS service meshes will see strong growth as well, with a CAGR of 68.2 per cent while ADCaaS and cloud VPNs will experience more modest growth with CAGRs of 17.5 per cent and 11.8 per cent 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.

"The rise of enterprise-grade, multicloud and SaaS applications for the modern distributed workforce is the driver of rapid growth in cloud WANs and other IaaS network services," said Rohit Mehra, group vice president of network and telecommunications at IDC.

IaaS cloud providers have recognised the importance of networking to their customers and have invested heavily to expand their dedicated IaaS networking solutions. These have become integral, complementary assets to their core IaaS compute and storage offerings.

Adoption of these services is driven by customer demand for network infrastructure and services, which have cloud-like networking capabilities and are consistent with the organizations' hybrid and multicloud strategies.

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 per cent of the total market spend in 2022 with AWS capturing more than half the total.

The news comes just as Gartner reported that IaaS revenue exceeded $100bn for the first time in history.