SaaS growth offsets IaaS slump in Western European cloud market

The cloud services market in Western Europe has remained largely resilient, with Software-as-a-Service (SaaS) continuing its steady growth, even as a marginal year-on-year dip in Infrastructure and Platform-as-a-Service (IaaS/PaaS) revenue has been recorded across the region's largest economies. These are the latest findings from CONTEXT, a global IT market intelligence provider.

According to CONTEXT, IaaS and PaaS revenues saw a modest decline of 1% year-on-year in the first part of 2025 across the United Kingdom, France, Germany, Spain and Italy. However, this downturn has not disrupted the overall positive trajectory of cloud services in the region, particularly those delivered through IT distribution channels.

"While we've observed a seasonal Q1 slump, which typically follows a strong December quarter driven by annual prepay subscriptions and financial year-end, the overall cloud revenue trend remains positive," said Chris Vallenduuk, Regional Director APJ at CONTEXT. "The recent slowdown is consistent with historic patterns and not indicative of any systemic weakness."

SaaS offerings in Western Europe continue to drive market growth, recording a 5% increase in revenue for March and April 2025. CONTEXT's research points to expectations of further acceleration for SaaS growth as the second quarter of the year progresses.

CONTEXT's analysis tracks the distribution of cloud services across 11 core product segments, including Endpoint Protection, Identity & Access Management, Network Security, and Office Applications. These leading segments make up around 80% of total SaaS revenues in the region, according to the data provided.

Within these categories, some clear patterns have emerged. "Among SaaS segments, Network Security has stood out for consistent revenue growth across the past three months, while Endpoint Protection has begun to rebound after a period of weaker performance," said Vallenduuk. He noted that, in contrast, "Office Applications have remained relatively flat since the start of the year."

Looking to the months ahead, the market may see renewed impetus. Vallenduuk pointed to new offerings from Microsoft, saying, "The market could see renewed momentum from mid-2025 with Microsoft's introduction of two new three-year Cloud Solution Provider (CSP) offerings for E3 and E5 licences. These give customers the option to move away from traditional enterprise agreements and prepay either annually or upfront for the entire term, a move expected to spur new activity in the channel."

Despite the brief slowdown in IaaS/PaaS revenues, the broader outlook for cloud services through IT distribution remains optimistic. Vallenduuk emphasised the ongoing importance of the channel, stating, "The fundamental demand for cloud services remains intact, and distribution continues to play a crucial role in bringing these services to market."

CONTEXT's market intelligence is based on data from the largest database of IT distribution sales in the world, tracking over $200 billion in global IT transactions. The company supports leading technology firms in identifying key market trends and making strategic decisions. CONTEXT is also a certified B Corporation, committed to upholding high standards of social and environmental responsibility.

The data and insights referenced pertain to the UK, France, Germany, Spain and Italy, which together represent the largest economies in Western Europe.