Cloud-enabling technologies (CET) market revenue is expected to grow at compound annual growth rate (CAGR) of 21% to reach $22.6bn by 2016, according to a report from 451 Research.
According to the report, virtualisation is expected to generate 66% of the revenue in the cloud technology market growing at 16% through 2016.
Automation and management is expected to grow at 28% CAGR with the first-tier virtualisation implementation by users, while security is anticipated to experience 29% rise during the forecast period.
451 Research research analyst Victoria Simons said that the drivers of growth are two fold.
"Initial adoption of the cloud is driven by the need for cost reduction and more efficient computing options," Simons said.
"As the infrastructure is virtualised, customers then need tools to manage, control and secure their IT environments to fully realise the benefits of virtual/cloud environments.
"We see the cloud-enabling technologies market growing strongly as large enterprises and SMBs continue along the path of flexible computing."
According to the report, there have been 12 acquisitions in the CET space since September 2012 and are expected to increase in the future.
In 2012, 87% of the cloud based revenue was generated by public firms, while private firms accounted for the remaining 13%.
About 44% of companies have been reported to generate annual revenue of less than $5m in 2012, while about one-third of vendors generated midmarket range revenue and six vendors generated revenue over $500m.