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cloud servicesNew data from 451 Research shows the cloud computing market is on track to grow from $28.1 billion this year to $53.3 billion by 2021. That represents a 19 percent compound annual growth rate. But more importantly, the mix of cloud services being consumed is already shifting toward higher margin offerings that are more profitable for managed service providers to deliver.

Revealed at the AWS re:Invent 2017 conference this week, the 451 Research cloud study projects that infrastructure-as-a-service (IaaS) will account for 57 percent of cloud-computing-as-a-service (CCaaS) revenue in 2017. The rest of the cloud market is made up of higher margin platform-as-a-service (PaaS) environments and infrastructure-software-as-a-service (ISaaS), which includes IT management software and cloud storage. 451 Research is forecasting that ISaaS will see the fastest growth through 2021, with a 21-percent compound annual growth rate. Integration PaaS will be the fastest growing sector within the PaaS market, with a five-year compound annual growth rate of 27 percent.

As the number of cloud services organizations consume increases, the more likely it becomes they will rely on MSPs to navigate a byzantine number of options. 451 Research notes that AWS alone has 320,000 different SKUs, and 53,000 of those were added in the first two weeks of November alone.

Simplifying cloud services complexity

In general, 451 Research projects that 60 percent of workloads will be running in some form of hosted cloud service by 2019. That’s up from 45 percent today. In addition, the research firm forecasts that 69 percent of customers will employ some form of multi-cloud environment in the same time frame. Thanks to the rise of technologies like Docker containers and platforms like Kubernetes, it will also become simpler to move application workloads between those clouds.

As more cloud services are consumed, the pressure to bundle those service will increase. For example, when customers buy a PaaS service, most will want the cost of the IaaS service that enables it to be included. Over time, that same thinking will be applied to the ISaaS offerings as well. The challenge MSPs will face is maintaining margins for the services they provide as the cost of the cloud services themselves decline. In fact, 451 Research notes that Microsoft, Google, and Oracle have all recently made significant adjustments to their pricing models in an attempt to take market share away from AWS.

There’s no doubt that rival cloud service providers are gaining ground on AWS. But even at current rates, it would be years, if ever, before any of them replaces AWS as the leading provider of cloud services. AWS has simply achieved a level of scale and momentum that rivals have yet to come close to matching. But as cloud computing continues to become more diversified, MSPs can count on the fact that as complexity in the cloud increases so will the demand for their services.

Photo: Bee-Teerapol/

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Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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