Cloud deals getting bigger in 2017

The PAC analyst team are currently reviewing our market figures and forecasts for 2017 and beyond, and one of the trends that has stuck out the most is the scale and growth of cloud computing.

A key part of the review process is to check whether the market’s main growth areas are delivering on their promise, and a raft of recent events have reinforced our view that cloud delivery is having a huge impact on all areas of software and IT services investment.

It is particularly noticeable that the scale of cloud deals is increasing. In the last couple of weeks, human resources SaaS player Workday has closed deals estimated to each be worth in excess of $100m with Walmart and Amazon.

The Amazon deal marks something of a bilateral accord between the two companies, with Workday announcing last year that it would move out of its own data centers and run its software from AWS centers.

And the details of this kind of SaaS delivery deal were highlighted this week in the IPO registration statement (S-1) of Snap, the owner of the Snapchat photo sharing app. Snap revealed that it will spend a whopping $2bn with Google over the next five years to run its services from the latter’s cloud data centers.

This is a huge commitment for a company whose annual losses topped $500m in 2016, and also represents Google’s biggest SaaS tenancy deal to date. An article in The Information claimed that Google offered a 50% discount on its normal rates to Snap to secure the deal.

The area of the IT services market that has seen the greatest impact from cloud delivery is infrastructure services, and based on analysis of PAC’s Deal Tracker, all of the 20 largest infrastructure deals recorded in 2016 incorporated a significant cloud delivery component.

The reach of cloud delivery continues to extend into places where concerns over data privacy and performance previously held it back. Last month, the US Army signed a new five-year, $62m deal with IBM to help it build a private cloud environment that will host many of the force’s critical applications.

PAC is currently planning an in-depth look at how quickly European businesses are adapting their infrastructure strategies to cloud delivery. More details can be found here.