- The top three vendors – AWS, Microsoft Azure and Google Cloud – together accounted for 63% of global spending in the quarter and collectively grew 42%.
- In a global economy rife with inflation, rising interest rates and recession, demand for cloud services remains strong.
- The hyperscale battle between leader AWS and challenger Microsoft Azure continues to intensify, with Azure closing the gap on its rival.
- AWS has plans to launch 24 availability zones across eight regions, while Microsoft plans to launch 10 new regions over the next year.
Even though the leading cloud service provider Amazon Web Services (AWS) accounted for 31 per cent of total cloud infrastructure services spend in the second quarter of this year, challenger Microsoft Azure continues to intensify, with Azure closing the gap on its rival.
Fueling this growth, Microsoft pointed to a record number of larger multi-year deals in both the $100 million-plus and $1 billion-plus segments. A diverse go-to-market ecosystem, combined with a broad portfolio and wide range of software partnerships is enabling Microsoft to stay hot on the heels of AWS.
Azure was the second largest cloud service provider in the second quarter, with a 24 per cent market share after growing 40 per cent annually. Google Cloud grew 45 per cent in the latest quarter and accounted for an 8 per cent market share.
The top three vendors – AWS, Microsoft Azure and Google Cloud – together accounted for 63 per cent of global spending in the quarter and collectively grew 42 per cent.
Opportunities abound for providers
According to the latest Canalys data, worldwide cloud infrastructure services spending increased 33 per cent year on year to $62.3 billion, driven by a range of factors, including demand for data analytics and machine learning, data centre consolidation, application migration, cloud-native development and service delivery.
The growing use of industry-specific cloud applications also contributed to the broader horizontal use cases seen across IT transformation.
The data shows expenditure was over $6 billion more than in the previous quarter and $15 billion more than a year ago.
Alex Smith, Vice-President at Canalys, said that the cloud remains the strong growth segment in tech.
“While opportunities abound for providers large and small, the interesting battle remains right at the top between AWS and Microsoft. The race to invest in infrastructure to keep pace with demand will be intense and test the nerves of the companies’ CFOs as both inflation and rising interest rates create cost headwinds.”
Partnerships accelerate
Both AWS and Microsoft are continuing to roll out infrastructure. AWS has plans to launch 24 availability zones across eight regions, while Microsoft plans to launch 10 new regions over the next year.
In both cases, the providers are increasing investment outside of the US as they look to capture global demand and ensure they can provide low-latency and high data sovereignty solutions.
“Microsoft announced it would extend the depreciable useful life of its server and network equipment from four to six years, citing efficiency improvements in how it is using technology,” Smith said.
“This will improve operating income and suggests that Microsoft will sweat its assets more, which helps investment cycles as the scale of its infrastructure continues to soar. The question will be whether customers feel any negative impact in terms of user experience in the future, as some services will inevitably run on legacy equipment.”
Beyond the capacity investments, software capabilities and partnerships will be vital to meet customers’ cloud demands, especially when considering the compute needs of highly specialised services across different verticals.
Yi Zhang, Canalys Research Analyst, said that most companies have gone beyond the initial step of moving a portion of their workloads to the cloud and are looking at migrating key services.
“The top cloud vendors are accelerating their partnerships with a variety of software companies to demonstrate a differentiated value proposition. Recently, Microsoft pointed to expanded services to migrate more Oracle workloads to Azure, which in turn are connected to databases running in Oracle Cloud.”
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