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Cloud data traffic is expected to quadruple by 2018 and account for over three quarters of total data center traffic by then, according to the Cisco Global Cloud Index (GSI) report for 2013 – 2018. Forrester Research also forecasted that the public cloud market would grow from $58 billion in 2013 to $191 in 2020. Cloud computing is gaining popularity fast because of many benefits for businesses, such as flexibility, cost savings, and scalability, and is also fundamentally changing our way of doing business.
What is cloud computing?
The National Institute of Standards and Technology (NIST) defines that cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

It is generally accepted that cloud computing comes in three service models: infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS).

1) Infrastructure-as-a-Service (IaaS)
IaaS is a service model for providing self-service, on-demand, near-real-time access to scalable and elastic infrastructure resources such as server, storage, and networking hardware. Customers do not manage the underlying infrastructure and are only responsible for the Operating System (O/S) and the layers above, but many of IaaS vendors offer managed services.
Amazon Web Services (AWS) and Microsoft Azure are leading the IaaS market. Forrester Research reported this segment would grow from $4.7 billion in 2013 to $14 billion in 2020.

SOURCE:  Gartner (May 2015)
2) Platform-as-a-service (PaaS)
PaaS is layered between IaaS and SaaS, and provides a wide range of solutions to help the customer develop applications easily and quickly without managing or controlling the underlying infrastructure and software, such as middleware and O/S. PaaS is a platform for creating software and delivering it over the Internet.
The market is very fragmented and crowded by over 100 vendors offering many forms of PaaS (xPaaS), such as Integration PaaS (iPaaS) and Business Analytics PaaS (baPaaS). Salesforce’s Force.com has been leading the market, but big names such as Amazon, Microsoft, IBM, Google, and Oracle are focusing on gaining significant market share in this segment. The PaaS market is the smallest among the three categories in terms of revenue but is expected to show the fastest growth and reach $44 billion by 2020.
3) Software-as-a-service (SaaS)
SaaS provides a customer with access to a SaaS vendor’s software service, which run on a cloud computing infrastructure. The vendor is responsible for everything from infrastructure to middleware and applications, and the customer can use it via a web browser or an application. Many consumer web services, such as Netflix, Dropbox, and Apple’s iCloud, and enterprise service, such as Salesforce.com and Citrix’s GoToMeeting, fall into this service category. The SaaS market is expected to grow from $53 billion in 2013 to $133 billion by 2020 (CAGR 14%), according to Forrester Research.
Trends
The boundaries between the three types of cloud computing are getting blurred as IaaS and SaaS vendors have been releasing PaaS-like features. For example, a traditional IaaS vendor Amazon has added PaaS-like capabilities, such as Elastic MapReduce. Recently, the company is moving more aggressively towards PaaS and announced additional new products, such as Amazon API Gateway, providing new tools and services for developers at the AWS Summit in New York.

The SaaS pioneer Salesforce.com has successfully expanded its business to PaaS. The firm’s Force.com provides tools helping developers create add-on applications integrated with Salesforce’s main applications, and it also acquired Heroku, a cloud development platform in 2010. Other SaaS vendors such as Intuit, Box, and Workday are also beginning to offer PaaS functionality.

Microsoft and Google, early leading PaaS vendors, are now equipped with IaaS capabilities and expanding their presence in the cloud market. IBM announced it would invest $1 billion for its PaaS initiatives last year, and Oracle also released its PaaS in September 2014.
Implications
Given its benefits such as agility, flexibility, and cost-efficiency, the adoption of cloud computing in the enterprise world is happening fast. According to the survey by Dimensional Research, 92 percent of IT professionals said cloud adoption strategies are one of top priorities. We already have seen many cases showing how companies like Netflix, Pinterest, and Apple innovated their business models and created values for customers by adopting cloud computing.

However, before adopting cloud computing, business leaders should establish a clear cloud strategy and align it with their business strategy first. They also need to understand where to adopt cloud computing and which service model (among IaaS, PaaS, and SaaS) and which vendor’s solutions to choose to achieve their business success. Furthermore, business leaders have to create measures to evaluate the impact of the cloud computing solutions on their operations and financial performance. Once they adopt new technology, they should focus on changing and optimizing their operations continuously.