Frank Gens, Senior Vice President & Chief Analyst, IDC

Researchers from the International Data Corporation (IDC) have dusted off their crystal ball and come up with the forecast that public IT cloud services will account for over half of all server, software and storage spending growth by 2018.

The research firm prophesizes that by the end of this year, cloud spending will reach some $56 billion, and will grow by some 22.8 percent by the end of 2018. At that time, it says public cloud spending will be worth some $127 billion.

“The cloud services market is now entering the “innovation stage” with an explosion of innovation and value creation on top of the cloud, along with mobile, social, and big data technologies,” said IDC Chief Analyst Frank Gens. “IDC predicts that a tripling community of developers will create a 10-fold increase in the number of new cloud-based solutions over the next four to five years.”

This rapid rate of cloud adoption will lead to increased competition among cloud vendors, fueling a period of consolidation in the industry. That could mean companies like EMC, which in recent times has often been mentioned as a possible acquisition target, could be gobbled up by a larger cloud services provider.

“This combination of explosive innovation and intense competition will make 2015 a pivotal one for current and aspiring IT market leaders,” added Gens.

IDC says software-as-a-service (SaaS) is set to remain as the most dominant segment in public cloud IT, accounting for some 70 percent of all spending this year. Next up is infrastructure-as-a-service (IaaS), which includes services like cloud compute and storage and is forecast to grow at an annual compound rate of 31 percent through 2018. Finally, platform-as-a-service (PaaS) and cloud storage will emerge as the fastest growing categories, driven by the momentum of Big Data analytics and developer cloud services.

IDC also referred to the ongoing price war between major cloud players like Amazon Web Services Inc., Google Inc., and Microsoft Corp., who are constantly slashing the costs of their services in a bid to win new customers. IDC predicts this battle will continue for some time, but warns that some day AWS may find itself in trouble.

“We’ll see unprecedented competition and consolidation among leading cloud providers,” said Gens.

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