Gartner: Cloud ‘Indispensable,’ Driven by Unceasing Generative AI Demand

Cloud computing, especially amid the rise of generative AI, has become “essentially indispensable.”

Gartner's Sid Nag

That’s the word from Sid Nag, vice president analyst at Gartner.

And yet, that does not mean cloud providers or partners may rest on their laurels. Cloud innovation cannot stop, or even slow, Nag said in a Nov. 13 press release.

“The tables are turning for cloud providers as cloud models no longer drive business outcomes, but rather, business outcomes shape cloud models.”

How Many Clouds in the Forecast?

As such, Gartner forecasts worldwide end-user spending on public cloud services to grow 20.4% in 2024. Dollar-wise, that translates into $678.8 billion compared to $563.6 billion in 2023. (Notably, it does not appear that organizations have shelled out as much on cloud computing this year as Gartner expected. The firm in April updated its guidance to reflect $597 billion in public cloud spending for 2023, but its new projections amount to considerably less than that.)

Much of the 2024 demand will come from organizations deploying generative AI capabilities. They’ll consume more cloud infrastructure, of course — nearly 27% more than in 2023. But Nag sees additional areas where cloud computing will win as generative AI turns into a new normal.

“[T]o deploy Gen AI effectively, these organizations will require cloud providers to address non-technical issues related to cost, economics, sovereignty, privacy and sustainability,” he explained. “Hyperscalers that support these needs will be able to capture a brand-new revenue opportunity as Gen AI adoption grows."

Gartner expects all segments of cloud computing to see more use next year. Again, IaaS will rule the roost, gaining traction from $144 billion in adoption to $182 billion, per Gartner. Platform as a service will come in second with a projected 21.5% increase, rising from $145 billion to approximately $176 billion.

Generative AI, Industry Clouds Pushing Adoption

The main trends fueling demand are generative AI and industry cloud platforms, Gartner said. Generative AI has dominated 2023. Within the channel, it started with the public launch of OpenAI, funded in large part by Microsoft. Indeed, Microsoft has led the way in generative AI this year, with main rivals Amazon Web Services and Google Cloud taking longer to catch up.

Meanwhile, industry cloud platforms are coming from the likes of Salesforce. Such vendors are targeting specific industries and vertical markets with custom cloud platforms that combine PaaS, IaaS and software as a service to address niche challenges. To that point, Gartner predicts that more than 70% of enterprises will use such solutions by 2027. That will represent a jump from less than 15% in 2023 and, no surprise, generative AI will drive the increase.

“Gen AI models that are applicable across diverse industry verticals might require significant customization, affecting scalability and cost-effectiveness,” Nag said. “Public cloud providers can position themselves as partners in the responsible and tailored adoption of Gen AI by building on the same approaches applied to industry clouds, sovereign clouds and distributed clouds.”

Other areas of cloud computing that will experience more consumption next year include cloud application services (going from $205 billion in 2023 to almost $244 billion); cloud business process services (rising from $66 billion this year to almost $73 billion); and cloud desktop as a service (increasing from about $2.8 billion to $3 billion).