"We are witnessing a shift from legacy IT services to cloud-based services. Cloud services are growing due to organizations pursuing a digital business strategy," said Sid Nag, research director at Gartner. "

"IaaS continues to be the strongest-growing segment as enterprises move away from data center build-outs and move their infrastructure needs to the public cloud," said Mr. Nag. "Certain market leaders have built a significant lead in this segment, so providers should focus on creating differentiation for success."

Cloud application Infrastructure services (PaaS) is forecast to grow 31.7 percent in 2016, to $82.1 million. This is an artifact of enterprises looking to develop and build applications in the public cloud that are cloud native, as well as non-cloud native applications that are refactored taking advantage of PaaS.