Global end-user spending on public cloud services is forecast to grow 21.7% to total $597.3 billion in 2023, up from $491 billion in 2022, according to analyst firm Gartner.

While all segments of the cloud market are expected to see spending growth in 2023, infrastructure-as-a-service (IaaS) spending is forecast to experience the highest rise, increasing by 30.9%, followed by platform-as-a-service (PaaS) at 24.1%.

While software-as-a-service (SaaS) spending is projected to grow at a slower rate, 17.9%, it will total  $197 billion in 2023 and remains the largest segment of the cloud market by total end-user spending.

“Organizations today view cloud as a highly strategic platform for digital transformation, which is requiring cloud providers to offer more sophisticated capabilities as the competition for digital services heats up,” said Sid Nag, a vice president and analyst at Gartner, in the company’s report. He added that in the current market, hyperscale cloud providers are driving the cloud agenda.

This is due to emerging technologies such as generative AI supported by large language models, Web3 and the metaverse driving what Gartner describes as “the next phase of digital business” and all of which require powerful computing capabilities to process data in real time.

Nag said that the next phase of IaaS will also be driven by emerging technologies, particularly as applied to customer experience. He explains that many of these technologies also help businesses interact better with their customers in real time, for example with generative AI-powered chatbots, and are reliant upon cloud infrastructure and platform services to meet growing demands for compute and storage power.

In a separate report published by Gartner in January, the analyst firm predicted that by 2025, 30% of outbound marketing messages from large organizations will be synthetically generated, up from less than 2% in 2022.

“Cloud offers the perfect solution and platform. It is no coincidence that the key players in the generative AI race are cloud hyperscalers,” Nag said.

Gartner predicts that by 2026, 75% of organizations will adopt a digital transformation model predicated on cloud as the fundamental underlying platform.