cloud1newSpending on public IT cloud services will grow five times faster than that for the IT industry as a whole from 2013 to 2017, according to a new report from IDC. Public IT cloud service spending will increase at a compound annual growth rate (CAGR) of 23.5%. Analysts at the Framingham, Massachusetts-based market research firm forecast spending on public IT cloud services will reach $47.4 billion this year and total more than $107 billion annually in less than five years’ time.

IDC forecasts that by 2017 public IT cloud services “will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure, platform as a service (PaaS), servers, and basic storage.” Software as a service (SaaS) will continue to be the largest revenue segment over the period, generating 59.7% of overall revenue, with Platform as a service (PaaS) and Infrastructure as a service (IaaS) growing fastest, at CAGRs of 29.7% and 27.2%, respectively.

It’s not just that cloud services’ adoption will increase in scale in moving from “Chapter 1” to “Chapter 2” of their evolution — according to IDC, growing adoption will be driven by the use of cloud services to solve problems. “In this phase of growth, cloud and the other 3rd Platform technologies – mobile, social, and Big Data – will become even more interdependent as they continue to drive growth and innovation across all industries that depend on IT,” according to an IDC press release.

“The first wave of cloud services adoption was focused on improving the efficiency of the IT department,” IDC SVP and chief analyst Frank Gens was quoted as saying. “Over the next several years, the primary driver for cloud adoption will shift from economics to innovation as leading-edge companies invest in cloud services as the foundation for new competitive offerings.

“The emergence of cloud as the core for new ‘business as a service’ offerings will accelerate cloud adoption and dramatically raise the cloud model’s strategic value beyond CIOs to CXOs of all types.”

An increasing variety of cloud services deployment options will be an important growth factor. “The emergence of virtual private cloud (VPC) offerings has helped to shift momentum from dedicated private cloud offerings toward public (shared/multi-tenant) cloud offerings,” IDC analysts point out.

“By offering the attributes of public cloud (economics, scale, pace of innovation) with some of the privacy and control features associated with private cloud, VPCs are effectively addressing many of the objections that have held customers back from the cloud model.”

At the same time, heightened competition and commoditization of basic cloud services, such as infrastructure and service offerings, will drive prices down and squeeze profit margins, it will also push vendors toward higher value offerings. “In order to survive, providers will have to scale their offerings ‘up and out’ toward a broader range (and dramatically larger number) of customers,” IDC says.