5 Reasons Service Providers Can’t Afford to Miss on B2B Cloud Services

While communications service providers have focused largely on connectivity services, the B2B cloud services market has continued to grow at an explosive rate. Service providers’ core connectivity markets are under pressure from new providers who offer cloud-based connectivity, service providers have not yet benefitted from the growth in B2B cloud services to the great degree these competitors have. Given the radical growth projected across the complete range of B2B cloud service segments and the comparatively modest growth projected for the global communications services market – with a few notable exceptions – service providers need to approach the B2B cloud services opportunity with a great sense of urgency.

Here are five clear, quantitative reasons service providers can’t afford to wait on the B2B cloud services opportunity and should move quickly to combine cloud-based connectivity with high-value B2B cloud services.

1. Communications Services to Grow at 2 Percent, Though SD-WAN Grows at 40 Percent

In contrast to the explosive growth in B2B cloud markets, the communications services market will grow only at a 2 percent CAGR through 2022, according to Gartner. The global communications market will exceed $1.5 trillion in 2021, so it continues to be a substantial market which is not being displaced by B2B cloud services but which faces new competitive threats.

One of this market’s fastest growing components – SD-WAN services - is closely related to growth in B2B cloud. According to IDC, the global SD-WAN market is expected to grow at a 40.4 percent CAGR through 2022 to become a $4.5 billion global market segment. It stands to reason that service providers should seek to seize the opportunity to lead in SD-WAN while bundling high-value B2B cloud services and applications with virtualized network offerings.

2. The Software-as-a-Service (SaaS) Market Will Reach Nearly $100B in 2020

Predicted by Gartner and reported by Forbes, the SaaS market is expected to grow at a 15.65 percent CAGR through 2020, which will expand the total SaaS market to $99.7 billion worldwide. By 2021 this market is expected to exceed $100billion – reaching $117.1 billion in that year, according to Gartner. The entire cloud market is expected to grow at a 13.38 percent CAGR in the same timeframe, making SaaS the largest and one of the fastest growing portions – though IaaS and PaaS are growing even faster.

3. The Infrastructure as a Service (IaaS) Market Will More Than Double by 2020

A recent report from Gartner shows that the IaaS market grew 29.5 percent in 2017, exceeding $23 billion worldwide. Unfortunately, no telecom service provider cracks the top 5 in market share today; Amazon, Microsoft, Alibaba, Google and IBM are the clear leaders today with 73 percent of the market, according to Gartner. With this market set to more than double again by 2020, service providers can’t afford to continue trailing the pack.

Similarly, the Platform as a Service (PaaS) market will nearly double in size by 2021, from $15 billion in 2018 to more than $27, according to Gartner. Given that analysts expect most will choose a single provider for PaaS and IaaS, it is increasingly urgent for service providers to gain market share in these two fast-growing B2B cloud segments.

4. The Security-as-a-Service (SECaaS) Market Will Nearly Double by 2023

A report from Research and Markets projects that the global managed security services market, also known as SECaaS, will grow from roughly $24 billion in 2018 to $47.65 billion by 2023. Given the rise of cyber threats worldwide and the liabilities enterprises face, this should come as no surprise. Merging network connectivity services with security capabilities is a natural step for service providers. Doing so from the cloud will align service providers with enterprise buying trends toward cloud technology.

5. The Cloud Storage Market Will Nearly Triple in the Next 5 Years

According to Markets and Markets, the cloud storage market will grow from just shy of $31 billion in 2017 to almost $90 billion ($88.9 billion) by 2022. This represents a 23.7 CAGR which is driven, according to the research, by increases in hybrid cloud storage; enterprise mobility; IoT expansion; and the ongoing call for reduced CAPEX and OPEX across enterprise sectors.

Cloud storage seems like the vanilla of B2B cloud services, but it stands as yet another indicator of the explosive growth cloud services will experience as enterprises move their IT infrastructure, applications and services aggressively into various flavors of cloud. Service providers need to be facilitators of this rapid shift sooner rather than later.