Figuring out the market for PaaS has always been difficult. At the moment, I tend to estimate it at $20–25bn sometime in the future (5–10 years from now?) based on the model of converting the existing middleware and application development market. Sizing this market has been something of an annual bug-bear for me across my time at Dell doing cloud strategy, at 451 Research covering cloud, and now at Pivotal.

A bias against private PaaS

This number is in contrast to numbers you usually see in the single digit billions from analysts. Most analysts think of PaaS only as public PaaS, tracking just Force.com, Heroku, parts of AWS, Azure, and Google, and bunch of “Other.” This is mostly due, I think, to historical reasons: several years ago “private cloud” was seen as goofy and made-up, and I’ve found that many analysts still view it as such. Thus, their models started off being just public PaaS and have largely remained as so.

I was once a “public cloud bigot” myself, but having worked more closely with large organizations over the past five years, I now see that much of the spending on PaaS is on private PaaS. Indeed, if you look at the history of Pivotal Cloud Foundry, we didn’t start making major money until we gave customers what they wanted to buy: a private PaaS platform. The current product/market fit, then, for PaaS for large organizations seems to be private PaaS

(Of course, I’d suggest a wording change: when you end-up running your own PaaS you actually end-up running your own cloud and, thus, end up with a cloud platform. Also, things are getting even more ambiguous at the infrastructure layer all the time — perhaps “private PaaS” means more “owning” the PaaS layer, regardless of who “owns” the IaaS layer.)

How much do you have budgeted?

With this premise — that people want private PaaS — I then look at existing middleware and application development market-sizes. Recently, I’ve collected some figures for that:

• IDC’s Application Development forecast puts the application development market (which includes ALM tools and platforms) at $24bn in 2015, growing to $30bn in 2019. The commentary notes that the influence of PaaS will drive much growth here.
• Recently from Ovum: “Ovum forecasts the global spend on middleware software is expected to grow at a compound annual growth rate (CAGR) of 8.8 percent between 2014 and 2019, amounting to $US22.8 billion by end of 2019.”
• And there’s my old pull from a Goldman Sachs report that pulled from Gartner, where middleware is $24bn in 2015 (that’s from a Dec 2014 forecast).

When dealing with large numbers like this and so much speculation, I prefer ranges. Thus, the PaaS TAM I tent to use now-a-days is something like “it’s going after a $20–25bn market, you know, over the next 5 to 10 years.” That is, the pot of current money PaaS is looking to convert is somewhere in that range. That’s the amount of money organizations are currently willing to spend on this type of thing (middleware and application development) so it’s a good estimate of how much they’ll spend on a new type of this thing (PaaS) to help solve the same problems.

Things get slightly dicey depending on including databases, ALM tools, and the underlying virtualization and infrastructure software: some PaaSes include some, none, or all of these in their products. Databases are a huge market (~$40bn), as is virtualization (~$4.5bn). The other ancillary buckets are pretty small, relatively. I don’t think “PaaS” eats too much database, but probably some “virtualization.”

So, if you accept that PaaS is both public and private PaaS and that it’s going after the middleware and appdev market, it’s a lot more than a few billion dollars.