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STAMFORD, Conn., March 26, 2009 View All Press Releases

Gartner Says Worldwide Cloud Services Revenue Will Grow 21.3 Percent in 2009

Cloud Services to Be Discussed at Gartner Outsourcing Summits Being Held in Las Vegas, London and Tokyo

Worldwide cloud services revenue is on pace to surpass $56.3 billion in 2009, a 21.3 percent increase from 2008 revenue of $46.4 billion, according to Gartner, Inc. The market is expected to reach $150.1 billion in 2013.

“Cloud computing is a broad and diverse phenomenon. Much of the growth represents a transfer of traditional IT services to the new cloud model, but there is also scope for creation of substantial new businesses and revenue streams,” said Ben Pring, research vice president for Gartner. “Cloud computing enables a shift in IT provision from direct purchase and payment for services to provision of services which are free at point of use and where revenue is derived from advertising. Services supported by advertising are currently, and will remain, the largest component of the overall cloud services market through 2013.”

Cloud computing is a style of computing where scalable and elastic IT-enabled capabilities are provided "as a service" to external customers using Internet technologies.

Business processes delivered as cloud services are the largest segment of the overall cloud services market, accounting for 83 percent of the overall market in 2008. The segment, consisting of cloud-based advertising, e-commerce, human resources and payments processing, is forecast to grow 19.8 percent in 2009 to $46.6 billion, up from $38.9 billion in 2008.

The largest component of the overall cloud services market is cloud-based advertising. This component represented 60 percent of the market in 2008 with revenue of $28 billion and is forecast to reach $33 billion, and make up 58 percent of the overall market in 2009. This reflects the success of Google in creating a new business and delivery model for IT-based services, which is being emulated by Yahoo, Microsoft and others.

“Advertising as a cloud service is the capability to deliver advertising where the content and the fee charged are determined at the time of end-user access, usually by an auction mechanism that matches bidders with spots as they become available,” said Mr. Pring. “We expect cloud-based advertising to continue to reshape and redefine the advertising and media markets over the next few years.”

While much of the publicity for cloud computing currently centers on systems infrastructure delivered as a service, this is still an early-stage market. In 2008, such services accounted for only 5.5 percent of the overall cloud services market and are expected to account for 6 percent of the market in 2009. Infrastructure services revenue was $2.5 billion in 2008 and is forecast to reach $3.2 billion in 2009.

“Cloud-based infrastructure services are expected to see significant adoption through 2013,” said Mr. Pring. “This segment probably has the largest range of possible outcomes, depending on how aggressively cloud computing is embraced by the major outsourcing vendors and their customers.”

Cloud application services, evolving from software-as-a-service (SaaS) offerings, were almost twice as large as the market for systems infrastructure and will continue to show strong growth. Not all current SaaS offerings qualify as cloud services based on scaling constraints and lack of true multitenancy capability. Over the next five years an increasing array of application functionality will become available as cloud services to supplement those from current cloud application vendors.

“The IT market trends for the next couple of years remain highly uncertain. While short-term growth is expected to be inhibited, the potentially lower cost of cloud services is attractive to customers and will drive growth for these offerings,” said Mr. Pring. “While that growth for many of these cloud services will be relatively modest through the next two years, we expect it to accelerate as these approaches prove themselves and then benefit from increased spending levels as macroeconomic conditions improve.”

Additional information is available in the Gartner report “Forecast: Sizing the Cloud; Understanding the Opportunities in Cloud Services” The report is on Gartner's website at http://www.gartner.com/DisplayDocument?ref=g_search&id=914826&subref=simplesearch.

Gartner analysts will further discuss cloud services, outsourcing and IT services trends at Gartner's Outsourcing Summits held in Tokyo (April 20-21), Las Vegas (May 4-6) and London (June 15-16). These Summits provide a comprehensive view of the entire outsourcing market — infrastructure, application and business process outsourcing, global delivery, and the use of offshore providers, as well as issues and trends about new delivery models, such as SaaS. For complete event details on these events, please visit:

Gartner Outsourcing & Vendor Management Summit – Las Vegas: www.gartner.com/us/outsourcing

Gartner Outsourcing & IT Services Summit – London:http://www.gartner.com/it/page.jsp?id=851614

Gartner Outsourcing Summit – Tokyo: http://www.gartner.com/it/page.jsp?id=851614

Members  of the media can register for the Summits by contacting Christy Pettey at christy.pettey@gartner.com.

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