Cloud Finance Press Release

Gartner Forecasts Worldwide Public Cloud End-User Spending to Reach Nearly 600 Billion USD in 2023

Cloud drives digital business transformation through emerging technologies, including generative AI.

Worldwide end-user spending on public cloud services is forecast to grow 21.7 percent to total 597.3 billion USD in 2023, up from 491 billion USD 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.” 

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 percent, followed by platform-as-a-service (PaaS) at 24.1 percent (see Table 1). 

Table 1. Worldwide Public Cloud Services End-User Spending Forecast (Millions of US Dollars)

Cloud Application Infrastructure Services (PaaS)111,976138,962170,355
Cloud Application Services (SaaS)167,342197,288232,296
Cloud Business Process Services (BPaaS)59,86165,24071,063
Cloud Desktop-as-a-Service (DaaS)2,5253,1223,535
Cloud Management and Security Services34,48742,40151,871
Cloud System Infrastructure Services (IaaS)114,786150,310195,446
Total Market490,977597,325724,566
Table 1. Gartner (April 2023)

BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service
Note: Totals may not add up due to rounding.

Gartner predicts that by 2026, 75 percent 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,” said 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 percent to total 197 billion USD 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.”

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