Publication date: 01 Sep 2023
IDC Says European Public Cloud Spending Will Reach $142 Billion This Year, Defying Budget Cuts Amid an Economic Downturn
London, September 1, 2023 – According to the Worldwide Software and Public Cloud Services Spending Guide published by International Data Corporation (IDC), public cloud services spending in Europe will total $142 billion in 2023 and will reach $291 billion by 2027, recording a five-year (2022-2027) compound annual growth rate (CAGR) of 20%. Software-as-a-service (SaaS) will continue to drive most of the spending, while platform-as-a-service (PaaS) will remain the fastest-growing area.
Europe has been hit by macroeconomic challenges throughout 2023, including high inflation across the Eurozone and the U.K., a banking crisis scare that originated in the U.S., and mass layoffs in the tech sector. Nonetheless, European businesses will push forward in their public cloud adoption journey and do not expect cloud-related investments to be at risk when it comes to IT budget cuts. About 55% of European companies will migrate to the cloud by the end of 2023 to improve IT staff productivity, strengthen data security, and drive AI-infused automation, which is gaining momentum thanks to the generative AI (GenAI) hype.
Banking, retail, and telecommunications will be the top spending industries in public cloud in 2023, accounting for 26% of the overall market value. Telecommunications companies have been less impacted by higher energy prices than other industries. Also, debt redemption in the telecom sector remains low, and costs linked to higher interest rates are contained, which creates favorable circumstances for releasing IT budgets. IDC expects public cloud investments in the telecommunications sector to grow strongly in 2024, placing it among the highest-spending industries, along with life sciences, utilities, and healthcare payer.
In the longer term, software and information services will have the highest CAGR among industries in Europe, growing 27% over 2022-2027. Despite being one of the most innovative sectors, software and information services has experienced reduced business revenue growth, mass employee layoffs, and higher infrastructure costs. These factors led businesses to invest in cloud to automate tasks in areas where headcounts were reduced and to support productivity among the workforces.
"Inflation remains high, costs of living are affecting customer price sensitivity, and businesses want to reduce costs to avoid financial trouble," says Andrea Minonne, research manager at IDC U.K. "Although IT prospects are less favorable than previously forecast and customers are facing price increases related to their cloud usage, cloud migration continues, since the technology is seen as a way to boost efficiency and optimize cost, going against the odds of an unfavorable market.”
Investments in cloud continue to drive innovation and, together with emerging technologies such as GenAI, will support businesses' digital transformation in the years to come. The rise of GenAI will also be a significant market factor, as it relies on extensive language models (LLMs) and demands strong and easily scalable computing capabilities to handle real-time data processing.
About the IDC's Worldwide Public Cloud Services Spending Guide
The IDC Worldwide Software and Public Cloud Services Spending Guide quantifies public cloud computing purchases by cloud type for 28 industries and five company sizes across eight regions and 47 countries. Unlike any other research in the industry, this comprehensive spending guide was designed to help IT decision makers clearly understand the industry-specific scope and direction of public cloud services spending today and over the next five years.
The 28 industries included in the IDC's new industry taxonomy are: Consumer; Banking; Insurance; Capital Markets; Healthcare Payer; Healthcare Provider; Life Sciences; Telecommunications; Oil and Gas; Utilities; High Tech and Electronics; Aerospace and Defense; Automotive; Industrial and Other Manufacturing; Chemicals; Consumer Goods; Agriculture and Fishing; Mining; Retail; Software and Information Services; Travel and Transportation; Hospitality and Leisure; Media and Entertainment; Engineering, Construction, and Real Estate; Professional and Personal Services; Education; Federal/Central Government; State/Local Government.
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly-owned subsidiary of International Data Group (IDG), the world's leading tech media, data and marketing services company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC and LinkedIn. Subscribe to the IDC Blog for industry news and insights: http://bit.ly/IDCBlog_Subscribe.
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