Public cloud services spending in Europe will total $142 billion in 2023 and will reach $291 billion by 2027, recording a five-year (2022-2027) compound annual growth rate (CAGR) of 20%. Software-as-a-service (SaaS) will continue to drive most of the spending, while platform-as-a-service (PaaS) will remain the fastest-growing area.
► European market will be worth $142 billion this year
► 55% will have migrated to the cloud by the end of 2023
The figures come from IDC’s latest Worldwide Software and Public Cloud Services Spending Guide. The report says that while Europe has been hit by macroeconomic challenges throughout 2023, including high inflation, a banking crisis scare, and mass layoffs in the tech sector, European businesses will push forward in their public cloud adoption journey and do not expect cloud-related investments to be at risk when it comes to IT budget cuts.
About 55% of European companies will migrate to the cloud by the end of 2023 to improve IT staff productivity, strengthen data security, and drive AI-infused automation, which is gaining momentum thanks to the generative AI (GenAI) hype.
Banking, retail, and telecommunications will be the top spending industries in public cloud in 2023, accounting for 26% of the overall market value. Telecommunications companies have been less impacted by higher energy prices than other industries. Also, debt redemption in the telecom sector remains low, and costs linked to higher interest rates are contained, which creates favourable circumstances for releasing IT budgets. IDC expects public cloud investments in the telecommunications sector to grow strongly in 2024, placing it among the highest-spending industries, along with life sciences, utilities, and healthcare payer.
In the longer term, software and information services will have the highest CAGR among industries in Europe, growing 27% over 2022-2027. Despite being one of the most innovative sectors, software and information services has experienced reduced business revenue growth, mass employee layoffs, and higher infrastructure costs. These factors led businesses to invest in cloud to automate tasks in areas where headcounts were reduced and to support productivity among the workforces.
Investments in cloud continue to drive innovation and, together with emerging technologies such as GenAI, will support businesses' digital transformation in the years to come. The rise of GenAI will also be a significant market factor, as it relies on extensive language models (LLMs) and demands strong and easily scalable computing capabilities to handle real-time data processing.
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