AI and IaaS/PaaS markets set for 'huge' growth: IDC

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AI and IaaS/PaaS markets set for 'huge' growth: IDC

IDC has released estimates on the future growth rates of two major technologies in the modern market, artificial intelligence (AI) and public cloud infrastructure and platform services (IaaS and PaaS).

The overall global AI market is estimated to increase 15.2 percent from 2020 to 2021, reaching US$341.8 billion. That growth is expected to rise to 18.8 percent in 2022 and the global market for AI is expected to pass the US$500 billion mark by 2024.

The combined IaaS and PaaS market is forecast to reach US$400 billion in 2025 with a compound annual growth rate (CAGR) of 28.8% from 2021 to 2025. By 2022, IDC anticipates that almost half of an enterprise's products and services will be digital or digitally delivered, increasing the business' reliance on infrastructure. 

IaaS and PaaS market breakdown

For the forecast period of 2021 - 2025, the largest segments by revenue share are expected to be application development and testing, structured data management, and structured data analytics.

The fastest growing segments will be unstructured data analytics/data management with a CAGR of 41.9 percent, and media streaming at 41.2 percent. 

Even the segments that will grow slower than the market average, including business applications, file and print, and content applications, will see double-digit growth.

IDC outlines three other trends driving the market throughout the coming years: a post-COVID-19 focus on resilience, operational efficiency and risk management;  application modernisation and migration; and management of data growth and IT budget through accessing scalable capacity.

"Enterprise spending on public cloud infrastructure continues to grow faster than traditional IT infrastructure segments," said IDC cloud infrastructure services research manager Andrew Smith. 

"We expect all workload segments to grow in the double digits — some slightly faster than others — as enterprises emerge from 2020 and continue to prioritize workload migration and modernization using public cloud infrastructure."

AI market breakdown

IDC broke the AI market down further into three categories: AI Hardware, AI Software and AI Services. 

By far the largest of these is AI Software which accounts for 88 percent of the overall market. However, AI Hardware is tipped as the fastest growing category in the near future, with AI Services expected to take the lead for growth rate from 2023 onwards.

Within the AI Software category, AI Applications is the largest subcategory with nearly 50 percent of revenues; AI Platforms has the strongest growth with a CAGR of 33.2 percent over the next five years; and AI System Infrastructure will have the slowest growth at 14.4 percent CAGR, although it will account for around 35 percent of all Software revenues.

The AI Services market was estimated at US$19.4 billion in 2020 and is forecast to grow 19.3 percent in 2021, rising to 21 percent CAGR over the next five years. 

This category breaks down into two subcategories: IT Services, which accounts for 80 percent of the AI Services market, and Business Services. Both are expected to grow at 21 percent CAGR over the next five years to see a total market of US$50 billion by 2025.

Under AI IT Services, the Top 3 companies in 2020 were IBM, Accenture, and Tata Consultancy Services, which each achieved over US$1 billion in revenues and combined for a total of 26% market share. 

The Top 3 companies for AI Business Services in 2020 were Ernst & Young, Accenture, and Deloitte, accounting for a combined share of 46%.

Overall, the competitive landscape in both services markets for AI remains highly fragmented.

AI Hardware, just 5 percent of the overall AI market, is broken down into Server, which accounts for 82 percent of the Hardware market; and Storage, which is expected to have a stronger 22.1 percent CAGR over the five year forecast period.

The AI Server market is led by Dell, HPE, Huawei, IBM, Inspur, and Lenovo who each generate over US$500 million in 2020 and held 62 percent of the market.

For AI Storage, it was Dell, HPE, Hitachi, Huawei, IBM, and NetApp that dominated, making US$100 million each with 68 percent of the market.

"Disruption is unsettling, but it can also serve as a catalyst for innovation and transformation. 2020 was the year that accelerated digital transformation and strengthened the value of enterprise AI," said IDC AI and automation research group vice president Ritu Jyoti.

"We have now entered the domain of AI-augmented work and decision across all the functional areas of a business. Responsible creation and use of AI solutions that can sense, predict, respond, and adapt at speed is an important business imperative."

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