• Continuing pandemic restrictions drive intense demand for the cloud to support remote working and learning, e-commerce, content streaming, online gaming and collaboration.
• Google Cloud was the fastest growing provider with 58%, followed by Alibaba Cloud with 54%, Microsoft with 50% and AWS with 28%.

Amazon Web Services (AWS) was the leading cloud service provider again in the fourth quarter of last year, accounting for 31 per cent of total spend, while Microsoft’s Azure accounted for 20 per cent.

According to research firm Canalys, cloud infrastructure services spending increased by 32 per cent to $39.9 billion in the fourth quarter, about $10 billion more than a year ago, due to heightened customer investment from major cloud providers and technology channels.

Continuing pandemic restrictions drove intense demand for the cloud to support remote working and learning, e-commerce, content streaming, online gaming and collaboration.

Moreover, a gradual recovery in economic confidence stimulated cloud investments by organisations in all industry segments to drive digital transformation. Cloud providers are extending their investments in channel partnerships to maintain high demand rates, and support customers, which will be critical for implementing projects in 2021 and beyond.

Blake Murray, Research Analyst at Canalys, said that demand for cloud services stayed strong across all enterprise customer segments, including industries most affected by the pandemic, such as retail and manufacturing. “The rate of digitalization, led by cloud, is gathering pace. Companies are now more confident about releasing budgets for business transformation,” he said.

For full-year 2020, total cloud infrastructure services spending grew 33 per cent to $142 billion, up from $107 billion in 2019.

After a mixed third quarter in terms of customer performance, AWS had a resurgence in customer investment. This fueled 28 per cent growth year on year for AWS in the cloud in the fourth quarter. AWS is making investments across its global partner ecosystem to sustain its momentum, including greater support for ISVs, launching new vertical partner competencies, further expansion into distribution to boost SMB adoption, and new partnerships as it extends its hybrid cloud strategy.

Diversifying business models

Microsoft’s Azure growth rate accelerated once again, up by 50 per cent to boost its market share, benefitting from the continued high demand for Teams, Windows Virtual Desktop and other Microsoft services running on Azure as lockdowns tightened.

Google Cloud was the third largest cloud service provider with a seven per cent share. It reported growth of 58 per cent in the fourth quarter, as it pushed its ‘open cloud’ strategy emphasising sovereignty, sustainability and multi-cloud management, and maintains a focus on its six target vertical industries. Alibaba Cloud grew 54 per cent in the quarter to account for six per cent of the total market.

It remained the leading cloud service provider in the Asia Pacific region, including China. It updated its hybrid cloud strategy during the quarter, with the launch of its Hybrid Cloud Partner Program and on-premises appliances targeting small and medium-sized businesses. The programme will enable partners to plan, design and resell Alibaba Cloud services with free licenses and unlimited CPU cores.

Murray said that large projects that were postponed earlier in the year are being re-prioritised, led by application modernisation, SAP migrations and workplace transformation.

Healthcare, financial services and pharmaceuticals are among the industries leading the way, he said but even those under most pressure are diverting investments to cloud, opening up new revenue streams and diversifying business models.

Digital transformation

All the major cloud providers are increasing their investments in the channel, both to leverage the consulting and managed services capabilities of partners, and to expand sales capacity to drive cloud consumption.

Microsoft holds the largest share of the indirect channel with Azure, though AWS and Google Cloud are gaining ground. Meanwhile, as customers deploy different workloads across public, private and edge cloud infrastructures, they are looking for independent partners with capabilities across multiple cloud providers.

Alastair Edwards, Chief Analyst at Canalys, said that organisations are turning to trusted business partners to advise, implement, support and manage their cloud journeys, and articulate the real business value of cloud migration.

 “Customer digital transformation projects are highly complex, requiring advanced consulting skills, combining deep technical skills with vertical expertise, which the cloud service providers are relying on partners to provide at scale. They are also turning to their partners to drive cloud consumption, and deliver full customer lifecycle support,” he said.

As organisations start to consider moving more mission-critical workloads to the cloud, he said that they will look to partners to define the right cloud platforms and strategies, as well as solve the most pressing issues around cost management, security, sovereignty and hybrid IT integration.