Canalys says Q2 saw a 33% rise in demand for infrastructure cloud services worldwide
While spending on cloud infrastructure services in Q2 rose by a third, to reach US$62.3 billion, the big three cloud service providers increased their infrastructure build by 42%. Clearly, they expect demand to increase.
Amazon Web Services (AWS), Microsoft Azure and Google Cloud are strengthening their grip, collectively accounting for 63% of the global market.
AWS accounted for 31% of total cloud infrastructure services spend in Q2, making it the leading cloud service provider. It grew 33% on an annual basis. Azure was the second largest cloud service provider in Q2, with a 24% market share after growing 40% annually. Google Cloud grew 45% in the latest quarter and accounted for an 8% market share.
Intensifying competition
The hyperscale battle between leader AWS and challenger Microsoft Azure continues to intensify, with Azure closing the gap on its rival. Microsoft pointed to a record number of larger multi-year deals in both the US$100 million-plus and US$1 billion-plus segments that are fuelling its growth. 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. 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 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,” said Alex Smith, VP, Canalys. “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.”
Specialist capabilities
Beyond the capacity investments, software capabilities and partnerships will be vital to meet customers’ cloud demands, especially when considering the compute needs of highly specialized services across different verticals, according to Canalys.
The general consensus in telecoms at the moment appears to be that Google is catching up on Microsoft’s early lead in the sector, with a string of recent big wins.
“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,” said Canalys Research Analyst Yi Zhang. “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.”
Canalys defines cloud infrastructure services as those that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared public infrastructure. This excludes software-as-a-service expenditure directly, but includes revenue generated from the infrastructure services being consumed to host and operate them.