India’s public cloud revenue to grow to $13 bn by 2026: IDC

Public cloud service revenue in India is estimated to grow to $13 billion by 2026 at a compound annual growth rate (CAGR) of 23.1% from 2021 on the back of growing adoption of digital services and 5G rollout, shows International Data Corporation’s (IDC) latest report, released on Thursday.  The overall public cloud services market in India including software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), and platform-as-a-service (PaaS) generated $2.8 billion in total revenue during H1 (January-June)  2022, the report added.

SaaS accounted for most of the revenue (63.5%) for the public cloud services market followed by IaaS (27.2%) and PaaS (9.3%) in H1 2022. In terms of vendor market share, the top two public cloud service providers Amazon Web Services (AWS) and Microsoft control more than 45% of the market.  

IDC analysts attributed the growth to the rising demand for digital services, which has spurred organisations to move applications to the cloud. 

“With the growth in digital innovation, organisations are looking to bring new products and services to the market faster through digital streams and increase their investments in technologies like AI/ML, edge computing, blockchain, and IoT to improve customer experience and business efficiency,” said Rajiv Ranjan, associate research director, Cloud, and AI at IDC India.

The growth in PaaS was driven by growing investments in the modernisation of legacy applications as part of the overall digital transformation of organisations, noted Ranjan. 

Cloud service providers are expanding their footprint in India and are setting up new data centres/cloud regions to cater to the demand for cloud services in new sectors and regions. For instance, last month AWS announced a new infrastructure region in Hyderabad with an investment of $4.4 billion over the next eight years. 

According to IDC, and BFSI, manufacturing sectors are the biggest adopters of the public cloud. However, demand has also grown in the public sector, media, and gaming. 

Demand for cloud-based AI platforms and cloud-native application development has also grown in India, as per IDC.  

Harish Krishnakumar, senior market analyst at IDC India, believes that cloud adoption will continue to grow as more Indian organisations want to “strengthen” their digital and smart capabilities, offer omnichannel customer expenses, and leverage real-time data analytics and connected platforms.  

“The recent launch of 5G services is expected to open up a gamut of opportunities for enterprises undergoing digital transformation, thus accelerating cloud proliferation,” added Krishnakumar.  

Growth in public cloud services has also given rise to SaaS startups in India, which according to Tracxn, have raised around $51 billion in funding in the first half of 2022.  

According to a March report by Motilal Oswal, India accounts for only 1% of the global SaaS market. However, it is one of the leading suppliers of SaaS services to other countries.