The digital transformation driven by the COVID-19 pandemic has pushed global spending on cloud infrastructure services to hit a first quarter record, growing 35 per cent to US$41.8 billion for the first three months of the year.
This is according to research firm Canalys, which claimed that this was the first time quarterly spending surpassed the US$40 billion mark during any given Q1.
By comparison, this quarter’s total spending was nearly US$11 billion higher than the same quarter last year and nearly US$2 billion higher than Q4 2020.
The research firm said, the acceleration of digital transformation over the past 12 months, with organizations adapting to new working practices, customer engagement, and business process and supply chain dynamics, has elevated demand for these services.
At the same time, a rebound in some economies, in line with government stimuli, the roll-out of mass COVID-19 vaccination programs and subsequent easing of restrictions, has increased customer confidence in committing to multi-year contracts.
Of the major vendors, Amazon Web Services (AWS) held onto its top spot once again, growing by 32 per cent on an annual basis during the quarter and making up 32 per cent of the total services spend in the period. However, Google and Microsoft reported some bumper cloud growth during the quarter.
Microsoft Azure grew 50% for the third consecutive quarter, taking 19% market share in Q1 2021. Growth was boosted by cloud consumption and longer-term customer commitments enabled by investments in Azure Arc for hybrid-IT control plane management, Azure Synapse for data analytics, and AI as a platform. It introduced new industry clouds propositions for financial services, manufacturing and non-profit organizations, adding to healthcare and retail.
Google Cloud maintained its momentum, benefiting from its Google One approach driving cross-sell and integration opportunities across its portfolio. Overall, it grew 56% in the latest quarter to account for a 7% market share. Cloud-native development and accelerated cloud migration among its customers has been boosted by its focus on industry-specific solutions, machine learning, analytics and data management. It announced a new cloud region in Israel.
“Cloud emerged as a winner across all sectors over the last year, basically since the start of the COVID-19 pandemic and the implementation of lockdowns. Organizations depended on digital services and being online to maintain operations and adapt to the unfolding situation,” said Canalys Research Analyst Blake Murray.
“Though 2020 saw large-scale cloud infrastructure spending, most enterprise workloads have not yet transitioned to the cloud. Migration and cloud spend will continue as customer confidence rises during 2021. Large projects that were postponed last year will resurface, while new use cases will expand the addressable market.” Investment at the edge, including 5G, is a key area, especially for the development of ultra-low latency applications and use cases, such as autonomous vehicles, industrial robotics and augmented or virtual reality.
Competition among the leading cloud service providers to capitalize on these opportunities will continue to intensify.
“Geographic expansion for data sovereignty and to improve latency, either via full-region deployment or a local city point of presence, is one area of focus for the cloud service providers,” said Canalys Chief Analyst Matthew Ball.
Another area he noted, is the differentiation through custom hardware development for optimized compute instances, industry-specific clouds, hybrid-IT management, analytics, databases and AI-driven services is increasing. Hence, it is not just a contest between the cloud service providers, but also a race with the on-premises infrastructure vendors, such as Dell Technologies, HPE and Lenovo, which have established competitive as-a-service offerings.
“The challenge will be demonstrating a differentiated value proposition for each,” Ball concluded.