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Coronavirus gives cloud service providers short-term boost

The move to hosted tools has helped drive record sales of cloud infrastructure services in the first quarter of 2020, but the big migration projects have been put on hold

As countries worldwide have entered into lockdown and the workforce has shifted to operate remotely where possible, the demand for online applications and tools has surged.

Zoom and Microsoft Teams have been two of the apps benefiting from the current situation, with Microsoft’s CEO Satya Nadella talking about seeing “two years’ worth of digital transformation in two months”.

Nadella pointed out that it was not just the remote workforce, but children remote learning that had driven the demand for online collaboration tools.

Coronavirus has sparked a surge in demand for cloud infrastructure services that has helped those operating in that part of the industry enjoy a record first quarter, according to Canalys.

The channel analysts found that spending on cloud infrastructure services increased by 34% in the first quarter, driven by the move to remote working sparked by Covid-19.

The crisis did pose significant challenges for vendors, with many having to wrestle with unprecedented levels of demand. The focus on dealing with coronavirus also meant that some of the large enterprise migration projects were put on hold.

The delay of those migration projects has hit cloud service providers hard, and has been combined with a drop-off in demand from some of the worst-hit verticals.

The channel has seen a reduction in demand from hospitality, aviation, construction, tourism and manufacturing, which has offset some of the short-term growth enjoyed during the quarter.

“This is uncharted territory for cloud service providers, giving a boost to consumption but creating new and often challenging customer dynamics,” said Alastair Edwards, chief analyst at Canalys.

“Cloud has become an essential tool to support business continuity in these difficult times. Many organisations have turned to the public cloud for its burst capabilities to meet a sudden spike in use. Platforms such as Zoom would not have been able to operate without the flexible infrastructure provided by the major cloud providers,’ he added.

The top four cloud providers – Amazon Web Services (AWS), Azure, Google Cloud and Alibaba – accounted for 62% of the overall market in the first quarter.

AWS was top of the pile with 32% of the total market in the first quarter as its sales grew 33%. Microsoft’s Azure sales increased 59%, taking its share to 17%, followed by Google Cloud and Alibaba with 6% share each.

The pressure is on those firms to keep services going with consumption remaining high in the short-term as more firms look to push applications into the cloud. Most of them have cut the ribbon on more datacentre capacity or talked about significant investment plans to support increased usage.

“Enterprises have been forced to rapidly change their IT infrastructure strategies and investment priorities in response to the pandemic,” said Canalys’s chief analyst, Matthew Ball.

“Cost reduction and protection of capital are priorities as the global economy weakens. Anything on-premise that does not improve current business continuity initiatives has taken a back seat as companies rethink budgets in the face of growing uncertainty or struggle to access physical datacentres.

“At the same time, companies around the world urgently need access to flexible compute capacity to support remote working, collaboration, online commerce and security. Cloud infrastructure is an obvious short-term solution. This has been a boon for most if not all the major players,” he added.

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