News & Analysis

Public Cloud Growth Could Get Tougher

New report says growth of the public cloud market would get harder over the coming years due to intensifying competition

The public cloud market would need to focus on providing value added services to continue their long history of growing at over 30% each year. And things can only get tougher due to the global economic meltdown, says an analyst working with Forrester Research. 


Competition between the major public cloud providers is intensifying and soon they would be forced to invest in value added services based on analytics, artificial intelligence, machine learning and other premium services to remain competitive at the top tier of the demand tree, says Forrester Principal Analyst Lee Sustar. 


The commodified infrastructure matters

These companies would also be burdened by the costs of the increasingly commodified infrastructure, says Sustar in a report published on SDXCentral. However, tougher competition may not necessarily mean lower growth rates as the analysts expects public cloud markets to grow by 20% plus annual rates, touching $1 trillion by 2026, from $446 billion now. 


However, growth from this point on could be a bumpy one, says the analyst adding that the global cues such as the Ukraine war, rising inflation and reduced money supply could all contribute to an immediate future of low demand.


Major players are just maintaining appearances

In fact, Forrester notes in its 2022-2026 public cloud market outlook that the major cloud players like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure were maintaining appearances at this point. For example, hyperscalers’ “poor decisions” and “suboptimal execution” can make a significant difference in their parent companies’ revenues, but that’s not always clear.


AWS has been responsible for keeping e-commerce giant Amazon in the black in recent quarters. Google Cloud, on the other hand, is piling up hundreds of millions in operating losses for Alphabet every quarter in an effort to grow cloud revenue. 


And Microsoft chooses to keep Azure revenue together with the rest of its revenue, leaving outsiders with no way to “know whether [Azure] is profitable in any conventional sense, even as Azure very slowly closes the distance with AWS for market share,” says Sustar in the report. 


Which brings us to the growing competition between these three cloud service providers. The research claims that the crucial areas of competition amongst them relates to data and analytics as a key differentiator. This impacts revenue and market share growth and future offers on this front would help them gain customers beyond the traditional IT operations business. 


Leave a Response