Worldwide spending on public IT cloud services will reach US$47.4 billion in 2013 and is expected to be more than $107 billion in 2017, according to a new forecast from the IDC research group (www.idd.com). Over the 2013–2017 forecast period, public IT cloud services will have a compound annual growth rate (CAGR) of 23.5%, five times that of the IT industry as a whole.

As one of the key technologies enabling the industry-wide shift to the 3rd Platform, cloud computing has played a crucial role in changing the way companies consume and use information technology. Now, there are signs that cloud services are starting to shift into a "Chapter Two" phase where the scale of cloud adoption will not only be much bigger, but also more user and solution driven, according to IDC. 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.

"The first wave of cloud services adoption was focused on improving the efficiency of the IT department," says Frank Gens, senior vice president and chief analyst, IDC. "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 important factor driving growth in public IT cloud services spending is the expanding variety of cloud deployment options. The growing richness of these options is a clear accelerator for overall cloud services adoption. 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. 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.

Similarly, growing commoditization and competition is expected to bring about consolidation in basic cloud services (infrastructure as a service offerings), and will force vendors to expand their offerings toward higher value services. While commoditization is expected to result in lower pricing and tighter profit margins, the competition will greatly expand the addressable market of solutions and customers. In order to survive, providers will have to scale their offerings "up and out" toward a broader range (and dramatically larger number) of customers.

The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period. By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage.

Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and Infrastructure as a service (IaaS), with CAGRs of 29.7% and 27.2%, respectively.