Indian public cloud market to grow exponentially in 2025

The Indian IT services market grew by 6.4% year-over-year in 1H2024, contributing 79.2% of the overall IT and business services market, reports IDC.

As one of the fastest growing economies in the world, India remains on the forefront of tech adoption in Asia Pacific. Cloud adoption in India remains high, as business look to innovate and enhance productivity in their digital transformation journey.

The Indian public cloud services market is expected to reach US$25.5 billion by 2028. The forecast from IDC’s Worldwide semi-annual Public Cloud Services Tracker also predicts the public cloud to grow at a CAGR or 24.3% from 2023 to 2028.

Be it infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) solutions, and software-as-a-service (SaaS), public cloud revenue for the first half of 2024 was a total of US$5.2 billion.

According to Harish Krishnakumar, Senior Market Analyst for IDC India, digital transformation initiatives and the rising shift towards as-a-service consumption models due to cost optimization priorities continued to drive public cloud adoption among Indian enterprises.

“As IT strategies evolve, enterprises are expected to gradually migrate their core mission-critical workloads to a public cloud environment. Rising GenAI adoption will continue to be a key driver of public cloud adoption in the upcoming years as public cloud remains one of the leading deployment choices for GenAI workloads, and cloud service providers are one of the top preferred strategic partners for GenAI implementations among Indian enterprises,” said Krishnakumar.

The report revealed that in the first half of 2024, the top five public cloud vendors accounted for more than half of the market share in India. In terms of deployment, SaaS remained the largest followed by IaaS and PaaS. This is most likely due to SaaS being easily adopted by businesses of all sizes as well.

At the same time, growth was also witnessed in AI platforms and application development software. This reinforces the demand for established enterprise applications like Customer Relationship Management (CRM), Enterprise Resource Management (ERM), and Collaborative Applications.

Interestingly, another report from IDC revealed that the Indian IT services market grew by 6.4% year-over-year in 1H2024, contributing 79.2% of the overall IT and business services market. IDC believes the growth not only reflects the public cloud adoption but also the sustained investments in GenAI adoption.

“Indian enterprises prioritized critical projects in areas like digital transformation, cloud migration, GenAI, cybersecurity, and such amidst cost optimization initiatives to drive innovation, improve business outcomes, and remain competitive,” added Krishnakumar

He also predicts investments in GenAI would likely surge as enterprises try leveraging GenAI for improved decision-making, enhancing customer experience, as well as integrating this into existing business applications, with IT service providers as their prime technology partners for their GenAI plans.”

Opportunities in the horizon

For IDC, the IT and business services market in India represents businesses that are project oriented, managed services and supposer services. While project-oriented services registered the highest growth rate for 1H2024 at 6.4%, managed and support services also recorded positive growth rates at 5.4% respectively.

Moreover, IDC believes that the system integration segment will be driven by initiatives like cloud migration, application modernization, integration of emerging technologies, and services around data engineering, infrastructure modernization, and implementation services to facilitate GenAI adoption. The managed services segment will be driven by the need to efficiently manage enterprise applications and infrastructure across complex distributed IT environments.

Neha Gupta, Senior Research Manager, Software and IT Services Market at IDC India believes these figures reflect India’s IT ecosystem at being in a pivotal moment. Gupta pointed out that as investments in AI and GenAI transition from discussions to implementation, the demand for advanced capabilities and elevated expectations from IT service providers is set to reshape the industry.

“Vendors are integrating AI into their offerings to enhance intelligence and operational efficiency. Consequently, the spotlight is on achieving data efficiency, ensuring robust security, and prioritizing the upskilling and reskilling of talent. The coming 12-18 months promise to bring transformative changes, redefining the trajectory of Indian IT services," said Gupta.

Meanwhile, Rajiv Ranjan, Associate Research Director, Cloud and Artificial Intelligence at IDC India believes that as more applications get modernized on public cloud, a large majority of these applications will be multi-cloud enabled as organizations would also modernize their cloud architecture to drive infrastructure and cost efficiency.

“Use of AI tools will increase to streamline cloud operations, improve cloud security, create innovative products and solutions and improve customer experience. Public cloud will not be restricted to cloud regions but will see adoption in edge locations as well,” said Ranjan.