Platform as a Service (PaaS) Market to Post 25.7% CAGR to 2020 but Adoption Rate Among SMEs Remains Dismally Low. Here’s Why.

The platform as a service (PaaS) market is projected to grow vigorously over the next five years, thanks to leading vendors in the market reporting record revenue. According to Transparency Market Research, the global PaaS market was pegged at US$1.60 billion in 2013 and is expected to reach a valuation of US$7.98 billion by 2020. This translates into a stellar CAGR of 25.7% between 2014 and 2020.

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Companies such as Microsoft, Rackspace, Google, and Amazon have developed sophisticated infrastructure over the past few years, and are now making a fortune by renting these out to smaller enterprises that lack the resources to build these platforms and networks themselves. There are several factors that will contribute to the impressive growth trajectory of the global PaaS market. Here’s a snapshot of the drivers for the PaaS market:

  • PaaS offers unmatched flexibility, agility, and scalability to enterprises, while also being a solution that’s easy to deploy. 
  • As leaner operations become the norm across firms globally, the focus of enterprises now lies on reducing capital expenditure and using a part of that for operating expenses. 
  • While the efficiency of PaaS is high, there is also the advantage of flexibility (for instance, pay-per-use) that comes with the model.  
However, that brings us to the most important restraint faced by the global PaaS market. PaaS has thus far proven to be an ideal solution only for companies that boast a certain degree of revenue and profitability. This means that SMEs are unable to harness the benefits that PaaS offers largely because of their inability to expend the required vendor fees.

From the standpoint of SMEs, the following factors prove to be the greatest impediments to the adoption of PaaS:

  • High Cost of Deployment and Maintenance of PaaS: Budgeting for the deployment of PaaS is only the beginning of switching over to this model. Additional expenses such as maintenance, upgrades, and scalability typically follow in a few months of deploying a PaaS solution as the scope of the application grows. For many SMEs, this is precisely the point where hiring a dedicated system administrator becomes more cost-effective than managing the entire PaaS application. 
  • Customization is Inevitable, and Expensive: While the scope of operations PaaS is extremely broad, enterprises often find that the operational features do not match their exact needs. This leads them to consider PaaS customization, which can be time consuming and expensive. Over the past few years, more and more SMEs have begun to invest in one-time custom application development projects.
  • The Question of Security: The cloud (whether public, hybrid, or private) is an inextricable part of PaaS solutions. However, businesses are still hesitant about putting all their data on the cloud. For SMEs, putting data on the cloud also brings in the need for DRaaS and business continuity and SLA management                                                                                                 
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Though these points don’t necessarily rule out PaaS as a suitable solution for SMEs, it will be a while before smaller enterprises become fully aware of ways to make informed decisions when opting for a PaaS solution. 


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