Worldwide end-user spending on public cloud services is forecast to grow 21.7% to total $597.3 billion in 2023, up from $491 billion in 2022, according to the latest forecast from Gartner, Inc. Cloud computing is driving the next phase of digital business, as organizations 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. “Organizations 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%, followed by platform-as-a-service (PaaS) at 24.1% (see Table 1).

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

Source: Gartner (April 2023) 

Gartner predicts that by 2026, 75% of organizations 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% to total $197 billion in 2023.

In India, end-user spending on public cloud services is forecast to grow 26.3% to total $10.1 billion in 2023. IaaS is forecast to record the highest end-user spending growth in 2023, followed by the PaaS segment (see Table 2).

Table 2. India Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)

Source: Gartner (April 2023) 

IaaS continues to be the core underlying scalable platform that powers new technologies such cloud native platforms, generative AI and digital touchpoints. Organizations in India that have historically lagged in adopting those technologies are embracing them, which in turn is fueling IaaS spending locally forecast to increase 33.1% in 2023.

“In India, PaaS spending is set to continue to grow and will increase 30.5% in 2023,” said Nag. “Spending on PaaS is driven by IT modernization efforts within Indian organizations, which have historically lagged and will remain a priority for local businesses this year.” In addition, many applications and workloads that are running in the cloud are being modernized with new cloud-native technologies such as serverless, functions, microservices, containers and embedded AI.

“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.”

Gartner clients can learn more in “Forecast: Public Cloud Services, Worldwide, 2021-2027, 1Q23 Update.”

Gartner analysts will provide additional analysis on cloud strategies and infrastructure and operations trends at the Gartner IT Infrastructure, Operations & Cloud Strategies Conferences taking place May 15-16 in Sydney, November 20-21 in London, December 6-8 in Las Vegasand December 12-13 in Tokyo. Follow news and updates from these conferences on Twitter using #GartnerIO.