Pressure mounting to stand out in the cloud crowd

The market for cloud infrastructure services is growing, but so is the competition

The cloud services market has expanded significantly during the coronavirus pandemic, and the pressure is now on the channel to try to differentiate their offerings.

The battle for customers has not just been at a public cloud level, but with most vendors offering hardware as a service, the options for those looking for infrastructure has been widening.

This provides the channel with more choice, but can makes it harder for cloud service providers to stand out from an ever-expanding crowd.

As well as putting more technology options in front of customers, cloud providers are also keen to capture any pockets of coverage that are still out there with geographical expansion – which is also another feature of the first quarter of the year.

“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.

“Differentiation through custom hardware development for optimised compute instances, industry-specific clouds, hybrid-IT management, analytics, databases and AI-driven services is increasing.”

“But it is not just a contest between the cloud service providers, but also a race with the on-premise 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,” he said.

Canalys found that cloud infrastructure services spending grew 35% to $41.8bn in the first quarter of 2021. The analyst house found that customer spending exceeded $40bn a quarter for the first time in the first quarter, with total expenditure not far off $11bn higher than in the same quarter last year.

Amazon Web Services (AWS) was top of the pile, with 32% growth in the quarter, accounting for 32% market share. Microsoft Azure also saw growth, up by 50% for the third consecutive quarter and 19% share. Google Cloud is slightly further back with 7% share, with it bringing in 56% year-on-year (YoY) growth in the first quarter.

“Cloud emerged as a winner across all sectors over the past year, basically since the start of the Covid-19 pandemic and the implementation of lockdowns. Organisations depended on digital services and being online to maintain operations and adapt to the unfolding situation,” said Canalys research analyst Blake Murray.

He added that there were several reasons why the momentum in the market would continue through the rest of the year: “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.”

The Canalys research coincided with quarterly numbers from the large public cloud players. First-quarter numbers from AWS showed growth of 32%, Microsoft’s Azure grew 50% and Google Cloud saw 46% improvements.

Read more on Public Cloud Architecture