SINGAPORE – The public cloud services market in Asia/Pacific excluding Japan and China (APeJC) reached US$41.5 billion in 2023, with a year-on-year (YoY) growth of 24.2%, according to IDC's Worldwide Semiannual Public Cloud Services Tracker, 2H2 3.

The public cloud services market growth in 2023 grew faster than the previous forecast, driven mainly by the rise of generative AI (GenAI). This trend led to a high demand for AI platforms and data management software. As a result, the PaaS market recorded a YoY growth of 46.5%, the highest in the past four years.

GenAI-infused applications also drove the SaaS market growth, which helped the SaaS market sustain over 60% of total public cloud services market share. In contrast, the IaaS market growth slumped from 21.3% in 2022 to 12.9% in 2023, which met IDC's expectation that the softened economic condition in the region is impacting organizations to focus on cost optimization strategy and shift the cloud spending to automation solutions to streamline business and IT operations.

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"Cloud providers are continuously releasing GenAI-related products that focus on developer-friendly and efficiency improvement, which have already brought significant impact to the PaaS and SaaS markets. The impact on the IaaS market is insignificant currently as the pricing structure and ongoing resource planning of accelerated compute are halting the organizations from running large-scale GenAI workloads on IaaS," says Liew Siew Choon, Senior Research Manager, IDC Asia/Pacific.

As more and more regulated institutions are adopting public cloud services, sovereignty has become a hot topic among regulated industries. This has attracted both global and local cloud providers to establish more datacenters in the region and expand the hybrid and sovereign cloud offerings to meet stringent industry compliances and regulations. These new local datacenters will certainly help drive the overall public cloud services market growth as they address latency needs and meet local compliance requirements. The options for hybrid and sovereign clouds will help regulated institutions to modernize legacy workloads and move more workloads to the cloud while meeting stringent and specific industry regulations.

The top five public cloud service providers for Asia/Pacific excluding Japan and China (in alphabetical order) – Amazon Web Services (AWS), Google, Microsoft, Salesforce, and SAP – remained the same as last year. Although they faced challenges from newcomers and other global players, they were still able to capture 41.2% of the total market share in 2023, which is slightly more than 41.0% in 2022.

The total public cloud services market size in APeJC is projected to reach US$50.8 billion in 2024, with a 22.4% YoY growth, and will grow more than double its size to US$103.0 billion by 2028, with a five-year compound annual growth rate (CAGR) of 19.9%. The PaaS market growth will continue to outpace the overall public cloud services market and the PaaS market size is expected to surpass IaaS market size by 2025.

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