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Gartner has released an updated cloud spending forecast for 2024
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Spending in the PaaS segment is now expected to be lower than previously thought thanks to new AI tools
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SaaS spending expectations have risen, however
Cloud platform-as-a-service (PaaS) offerings were a $143 billion-dollar business in 2023 and are poised for nearly 21% growth to $172.4 billion in 2024. But according to Gartner’s latest cloud forecast, that latter figure is roughly $4 billion lower than the firm expected six months ago. What’s behind the change? Artificial intelligence (AI), Gartner VP Analyst Sid Nag told us.
Nag explained PaaS offerings are typically development platforms used for creating new applications. Think things like coding SDKs and the like. But the recent introduction of AI code generation tools like Amazon CodeWhisperer and Google Cloud’s Gemini Code Assist and CodeGemma is disrupting the landscape.
These tools allow developers to use natural language queries to both find data and generate lines of code that can be copy/pasted into a product code base.
“We just completely eliminated [the need for] any complicated PaaS capability,” Nag said.
Because PaaS vendors tend to be the same companies offering the aforementioned AI solutions (i.e. cloud hyperscalers), Nag said the change will pan out as more of a dollar shift for vendors rather than a loss of business.
Behind the numbers
There were a few other changes Gartner made to its cloud spending forecast, primarily in the software-as-a-service (SaaS) segment. This is now expected to hit $247.2 billion in 2024, up from a previous expectation of $243.9 billion.
Have a look at the charts below which spotlight some of the major forecast changes.
Nag said the SaaS market is actually expected to grow independent of the AI “tsunami” as more enterprises turn to software vendors to modernize their applications and tap into big data and analytics.
What about IaaS?
While the infrastructure-as-a-service (IaaS) forecast has been lowered slightly for 2024, Nag said it is expected to really take off in 2025 thanks to AI and the demand it’s driving for servers, storage and silicon. Nag noted that hyperscalers are increasingly building their own silicon to supplement and compete with solutions from the likes of vendors like Nvidia. That will further boost the market, he said and so we’ll see the “IaaS market get a bump as an artifact of AI need.”
In a separate forecast, Gartner predicted global revenue from AI semiconductors is expected to jump 33% in 2024 to $71 billion and grow further in 2025 to nearly $92 billion.