Infrastructure-as-a-Service Market

Market Overview

The global infrastructure-as-a-service market size was valued at USD 58 billion in 2021 and is estimated to reach an expected value of USD 385 billion by 2030, registering a CAGR of 23.4% during the forecast period (2022 – 2030).

A cloud computing solution called Infrastructure-as-a-Service (IaaS) reduces hardware costs by offering virtual server rooms and network systems in external or internal data centers. It supplies large, small, and medium-sized businesses with comprehensive IT infrastructure components, including servers, networks, storage systems, and data centers (SMEs).

One of the main factors driving the growth of the worldwide infrastructure-as-a-service market is the cost-effective advantages of IaaS technology, growth in demand for faster data accessibility, and increase in cloud adoption across various industrial verticals. Government spending on ICT in various established and developing nations and a significant trend toward hybrid clouds as the predominant deployment strategy contribute to the market's expansion. However, it is projected that the absence of global standards and the rise in privacy and security issues will limit industry expansion. On the other hand, throughout the forecast period, it is projected that the integration of AI with IaaS and the rise in demand for IaaS by SMEs would offer lucrative growth prospects for the worldwide infrastructure-as-a-service market.

Market Dynamics

Market Driving Factors

The Rise in Demand for Low-Cost IT Infrastructure and Faster Data Accessibility

Enterprises across the globe are focused on creating a mobile workforce, where employees can access data from distant places through internet services, hence requiring virtual sets of IT components such as servers, storage, networks, and others. IaaS enables faster data access irrespective of data center location due to standard IT infrastructure installation. In addition, IaaS incurs low investment costs, as it does not require an on-premise data center and additional services and maintenance costs. Managed service providers, including Amazon Web Services, Inc., Microsoft Corporation, and IBM Corporation, provide continuously available cloud service throughout the year as a part of their integrated cloud service offering.

With the most responsive scalability characteristic of pooled cloud servers, end users find IaaS a significant cost savings service where a client only pays for what they use. In addition, end users also avoid the setup costs, which otherwise are incurred by bringing individual servers online. This is a significant factor expected to drive the growth of the marker during the forecast period.

Increase in Cloud Adoption Across Several Industry Verticals

Several industry verticals like banking, financial services and insurance (BFSI), retail, manufacturing, healthcare, telecommunication & IT, media & entertainment, and many others adopt cloud services at a rapid pace. In addition, the banking sector has adopted IaaS at a large scale due to benefits such as cost savings, data protection, and disaster recovery services.

Moreover, technological advancements in the IT sector and their applications in large enterprises and SMEs also create an adequate space for market development in developed regions, including North America and Europe. For instance, in December 2016, American Airlines partnered with IBM Corporation to implement IaaS to integrate and streamline its business processes. This strategic move by IBM is anticipated to augment cloud adoption among the end-users.

Market Restraining Factors

Security Concerns over Private Cloud Deployment

Industry verticals including BFSI, retail, healthcare, and public sector with large customer bases, are prone to retain critical business information of stakeholders, owing to data privacy and client information. Major cloud service providers adhere to security guidelines, to provide storage and network security across all the developed and developing regions including North America, Europe, Asia-Pacific, and Latin America. In February 2017, Amazon Web Services, Inc. launched alarms on the dashboard in its CloudWatch (network monitoring solution) to enhance the supervision of critical metrics over dashboards.

In recent years, high-profile hacking and security breaches in the public cloud have increased substantially. Security concerns over safeguarding stakeholders' information and private data are considered a major restraining factor in cloud infrastructure deployment by several industrial sectors such as BFSI, government, healthcare, retail, and others. Security risks including organizational, physical, technological, compliance, and data breaches are some of the major factors expected to hamper the market growth. Moreover, extended security services attract more prices for cloud deployment, hindering users' cloud adoption process.

Furthermore, the lack of IT infrastructure in underdeveloped regions is also expected to hinder market growth to a certain extent. According to the World Economic Forum, an international organization for public-private cooperation, several countries from regions including Asia-Pacific, Latin America, the Middle East, and Africa are yet to transform into technologically advanced hubs with rich IT infrastructure and digital content, and this is expected to hinder the market progression in the coming years. In addition, slow ICT adoption and procurement of IT projects in countries such as Mexico, Chile, Egypt, Thailand, and many others obstruct market development.

Key Market Opportunities

Growth in Cloud Adoption among SMEs

In recent years, cloud infrastructure adoption has increased among SMEs owing to advantages such as enhanced uptime, reliability, enriched IT service, increased flexibility of data access, and operational speed. According to the Cloud Industry Forum, SMEs tend to adopt the cloud primarily for cost-effective business models and virtual networking and storage options. Factors including improved customer support, enhanced business continuity, and replacement of conventional IT infrastructure are expected to create adequate space for market growth during the forecast period.

Cloud computing has emerged as a top trend in several industry verticals, including the banking and financial sector, public sectors, healthcare, manufacturing, telecommunication & IT, business service provider, and many others. Document storage, network security, virtual data center, and many other operational needs are carried out through cloud applications, which is anticipated to create potential space for IaaS across the globe. According to the U.S. International Trade, by 2020 Infrastructure-as-a-Service (IaaS) and PaaS (Platform-as-a-Service) are anticipated to be traded more than physical data centers and as a part of IaaS in the coming years.

Regional Analysis

Region-wise, the global Infrastructure-as-a-Service market is analyzed across North America, Asia-Pacific, Europe, and LAMEA.

North America was the highest revenue contributor and is estimated to grow at a CAGR of 21.3%. North America offers adequate infrastructural development to adopt IaaS technology. In addition, leading vendors are focused on developing novel solutions, strategic alliances, and geographical expansion to strengthen their market presence globally. The BFSI and government industries are expected to dominate the infrastructure-as-a-service market during the forecast period. The surge in demand for low-cost cloud infrastructure development and quicker network accessibility are the main drivers of the North American market. The increased need for big data storage and the increased use of IaaS gateways also contribute to the expansion of this industry.

Europe is the second largest region. It is anticipated to reach an expected value of USD 105 billion by 2030, registering a CAGR of 23.4% The European infrastructure-as-a-service market is growing at a substantial growth rate, owing to the rise in adoption of IaaS due to cost-effective solutions and growth in awareness regarding the benefits of IaaS among the key market players. In addition, the incredible awareness regarding different types of cloud computing services is further accelerating the growth of this market in Europe. Furthermore, great internet penetration across the European region boosts market growth. European Commission is also taking initiatives to develop the relevant regulations for cloud services switching. For instance, according to Internet World Stats, Europe had 87.7% internet penetration. The 'SWIPO' cloud stakeholder working group finalized the development of two Codes of Conduct on data portability and cloud switching in December 2019. The SWIPO working group also delivered a comprehensive proposal for a governance structure that should make the Codes of Conduct practically enforceable through a complaints mechanism for users. Moreover, an increase in the usage of IaaS solutions in e-commerce companies is also expected to drive market growth in this region.

Asia-Pacific is the third largest region. Asia-Pacific is expected to witness the highest growth in the infrastructure-as-a-service market, owing to the adoption of fast internet connectivity, including 4G connections, a large population base, a rise in competition among telecom& IT service providers, increase in GDP. In addition, telcos in Asia-Pacific are partnering with different cloud service providers to offer a single cloud offer that comprehends public and private storage and compute alongside connectivity either through IP-VPN or dedicated lines which is encouraging the growth of the infrastructure-as-a-service market in the Asia-Pacific region. With the increase in vendors offering reasonable, superior, and personalized solutions, there is massive competition in the Asia-Pacific region. High demand for cloud and growth in the need for enterprise mobility for improved efficiency combined with good economic growth drives the growth of the infrastructure-as-a-service market in the Asia-Pacific countries. Moreover, increases in IT expenditure and growth in population in countries such as India and China are anticipated to provide lucrative opportunities for market growth. Further, international players are focusing on their expansion in Asia-Pacific to cater to the untapped markets.

Segmental Analysis

The global Infrastructure-as-a-Service market is segmented by component type, deployment mode, user type, industry vertical, and region.

By component, the global Infrastructure-as-a-Service market is divided into storage, network, compute, and others. The compute segment was the highest contributor to the market and is estimated to grow at a CAGR of 22.9% during the forecast period. The market for virtual computing is expected to be driven by an increase in demand for reliable performance, on-demand Application Programming Interfaces (API), and security for physically isolated networks. Moreover, increase in preference for the pay-as-you-go model and cloud orchestration service, several industry verticals, including government & education, manufacturing, healthcare, retail, and many others, majorly opt for cloud computing, which in turn is expected to fuel the market growth.

By deployment model, the global Infrastructure-as-a-Service market is divided into private, public, and hybrid models. The hybrid segment was the highest contributor to the market and is estimated to grow at a CAGR of 23.8% during the forecast period. The involvement of high cost in the private model owing to data sovereignty, security, compliance, and migration is expected to hinder market growth. However, several users, including SMEs and large enterprises, opt for secure cloud space to maintain their IT infrastructure with confidential customer information. For instance, in April 2017, Dunkin' Brands selected Amazon Web Services Inc. as its cloud infrastructure provider to migrate several applications such as mobile applications, e-commerce websites, critical corporate applications, and others. Furthermore, private cloud adoption models provide additional procurement, customization, and security features to an existing organization infrastructure, which propel the demand for private deployment models for IaaS services.

According to user type, the global Infrastructure-as-a-Service market is categorized into small & medium enterprises (SMEs) and large enterprises. The large enterprise segment was the highest contributor to the market and is estimated to grow at a CAGR of 20.7% during the forecast period. Large enterprises have access to their own data centers; therefore, the transition from on-premise to cloud is a trend driving this market. However, recent trends show that many large organizations are trending toward cloud adoption in developed and developing regions, including North America, Europe, and Asia-Pacific. For instance, in 2016, The Coca-Cola Company declared to move 50% of its IT infrastructure to the cloud in coming years with major cloud service providers such as Google, Inc. and Amazon Web Services, Inc. Globally, large enterprises have witnessed the shift of IT spending cloud-based application services. This has propelled the demand for hybrid solutions that help large enterprises to adopt IaaS for its pay-as-you-go model. The abovementioned factor is expected to drive the market's growth in the coming years.

As per industry vertical, the global Infrastructure-as-a-Service market is divided into banking, financial services and insurance (BFSI), government & education, healthcare, telecommunication & IT, retail, manufacturing, media & entertainment, and others. The telecom & IT segment was the highest contributor to the market and is estimated to grow at a CAGR of 21% during the forecast period. The adoption of IaaS in telecom & IT organizations is growing remarkably due to reduced staff expenditure and maintenance costs of physical infrastructure. The increased use of mobile broadband and big data have propelled the need for IaaS in the telecom sector. North America is leading in terms of market size for IaaS in the IT and telecom sectors. The market is expected to experience prominent growth, owing to the adoption of technologies, specifically cloud and mobility. Moreover, the ability of IaaS to shift the capital requirement to an operational expense which helps track the business's growth, is expected to impact positively on the market. This is attributed to IaaS, IT services that are delivered as a subscription service, eliminate up-front costs, and drive down ongoing support costs.

Recent Developments

• October 2022 - Sibos 2022, IBM (NYSE: IBM) and Tietoevry, an IT software and services company headquartered in Finland, announced a global technology and consulting collaboration for its financial technology software unit Tietoevry Banking to help deliver secure and innovative solutions for payment and transaction technology to banks globally. 
• October 2022 - IBM (NYSE: IBM) announced today it would add Red Hat storage product roadmaps and Red Hat associate teams to the IBM Storage business unit, bringing consistent application and data storage across on-premises infrastructure and cloud.