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December 19, 2011

How Big Will Cloud Computing Revenues Be in 2016?

By Gary Kim, Contributing Editor

The cloud computing market will represent $240 billion worth of revenue by 2016, up from $77 billion in 2011, according to Visiongain (News - Alert).

Visiongain believes that mobile cloud service revenues will reach $45 billion in 2016, with a compound annual growth rate of 55.18 percent from 2011. Cloud computing forecast

At year end 2016, more than 50 percent of Global 1000 companies will have stored customer-sensitive data in the public cloud, Gartner (News - Alert) researchers also believe.

Those forecasts are higher than some forecasts in early 2011. To forecast revenue, analysts start with the concept of average revenue per employee per month. Yankee Group (News - Alert) calculates average revenue per employee for software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS) as $4, $2 and $1, respectively.

For example, a typical enterprise will spend $4 per employee per month on SaaS (News - Alert). This is equivalent to $48 per year per employee, or what a small business or sole proprietor might pay for an online backup service such as Mozy or Carbonite and simple collaboration software like Evernote or Dropbox.

All of that adds up to annual revenue of about $23 billion by 2014, Yankee Group has estimated.

The Yankee Group global forecast for cloud computing revenue includes some key definitions.

Yankee Group defines midsize to large enterprises as 250 or more employees. The forecast also includes SMBs, which the firm defines as organizations with two to 249 employees. The forecast excludes consumer cloud services but does allow that small businesses will often adopt consumer cloud services for business use.

Yankee Group excludes sole proprietors from infrastructure as a service and platform as a service because analysts do not believe the typical small business has a need for those services.

The forecast likely understates demand in the small business segment to the extent that many small software firms will have high incentives to buy platform and infrastructure services "as a service."

Those developments will affect many other industries and businesses. Separately, analysts at Gartner estimate that, by 2015, low-cost cloud services will cannibalize up to 15 percent of top outsourcing players' revenue.

Gartner sees low-cost cloud services disrupting traditional IT in the same way that low-cost air carriers like Ryanair and Southwest disrupted the major commercial airlines.


Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves
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