Cloud computing has come on a long journey. Not too long ago, you needed significant on-site IT resources (eg. physical data centres and services) to access large quantities of computer power, storage and databases. Today, you can access these solutions online at great speed, ease and lower cost via a cloud computing provider – using pay-as-you-go pricing. In 2022, in the aftermath of COVID-19 lockdowns, cloud computing has become an increasingly important part of business infrastructure across a range of verticals. In this industry report, we examine some of the latest developments in cloud computing following the pandemic – identifying trends, opportunities and pitfalls for investors in this exciting space.
Cloud computing 2022: market overview
In 2021, the global cloud computing market was valued at USD 368.97 billion, with USD 135 billion based in the USA. This falls within an overall USD 1.3 trillion in IT services spending across the world, and follows a compound annual growth rate (CAGR) of 15.7% expected from 2022 to 2030. Cloud computing is used for a wide range of purposes by organisations and individuals across a variety of sectors. These include:
- Data backup (e.g. WhatsApp messages and photos).
- Disaster recovery (e.g. the crash of a new business website design).
- Software development and testing.
- Big data (e.g. data sets used by online streaming services like Netflix, to build predictive models of user behaviour).
- Customer-facing web applications.
Major players and segments
The key players in cloud computing in 2022 have held steady for many years – including their market share. Amazon Web Services (AWS) retains the global lead at 33% market share in Q4 2021, with Microsoft azure coming up second at 21%. Google Cloud comprises 10%, with other players making up the remaining market share (at single-figure percentages).
It is useful to look at this overall cloud computing market through its commonly-defined segments. Broadly speaking, there are three main categories: infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). Within each, you can find three main cloud computing solutions: private cloud, public cloud and hybrid cloud. Public cloud retains the main choice for businesses (91%), with private and hybrid following (72% and 69%, respectively). This option provides the user(s) with access to the vendor’s data centre infrastructure – effectively outsourcing all management, maintenance, security, and upgrades. This is the most “hands-off” approach and often the least expensive, making it a natural choice for many smaller businesses.
SaaS – the flagship in cloud computing
Of all the three cloud computing categories, SaaS is the largest and most “mature” (although it is important to note that all three often blur together, and SaaS providers also typically offer the other two services as well). According to Synergy Research Group, the sector has an annual run rate over $100 billion – putting annual growth at 30%. Five vendors dominate the space, accounting for 51% of the worldwide SaaS cloud market (Microsoft leads the way at 17% market share with Salesforce second at 12%). The future outlook for SaaS is strong, with the sector expected to grow from USD 130.69 billion to USD 716.52 billion in 2028 between 2021-2028 (CAGR of 27.5%).
The impact of COVID-19 and other trends
Perhaps the biggest transformation to the workplace in decades emanated from the pandemic in 2020. With “non-essential” workers told to work from home, organisations across verticals were forced to turn to the cloud to facilitate this. Cloud computing, therefore, was one of the few sectors that thrived during lockdown. Globally, Microsoft Team platform users surged to 44 million (up from 20 million in November 2019). Streaming platforms such as Amazon Prime, Disney+ and Netflix enjoyed increased users as bored remote workers looked for entertaining ways to spend their government support payments.
The trend towards remote working appears here to stay, especially with UK workers now in a stronger position to demand flexible working arrangements in new contracts (due to the labour shortage). Businesses are also keen to “pandemic proof” their operations in case another lockdown revisits the nation. Two headwinds can be seen in 2022, however. Firstly, higher inflation has resulted in many households cutting back on discretionary spending. Certain sectors that are built on cloud computing such as streaming services, therefore, could see a fall in demand in the coming months. Secondly, security concerns continue to affect cloud services. After all, if another business (a vendor) is going to maintain your data needs, you should be certain that it will protect it. Cyber attacks continue to harass the industry, although innovations in cybersecurity can offer a great deal of protection.
Final thoughts for investors
Investing in the cloud sector can take many forms. Of course, you can invest directly in the shares of cloud providers (e.g. Amazon) on public exchanges. However, there are many niches within the wider sector such as machine learning, big data and artificial intelligence (AI) which can present their own unique opportunities. High-potential startups which could take on the big players are hard to find, but many exist amongst the smaller specialised markets.
Here at Bure Valley Group, our investor network can offer a range of pre-vetted projects for your consideration.
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
+44 160 334 0827