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Canalys adds to narrative of surging cloud spending

Analysts have tracked the increase in spending in Q1, with AI playing a major role in driving investments

There has already been some research indicating that cloud spending has defied economic gravity and grown in the first few months of 2024.

Adding to findings from the likes of the Cloud Industry Forum (CIF) and Daisy Corporate Services is an analysis of Q1 from market watchers Canalys.

The analyst found that global cloud spending increased by 21% in Q1, with the top hyperscalers, AWS, Microsoft Azure and Google Cloud, accounting for 66% of total spending.

The cloud market is feeling the impact of artificial intelligence (AI), which is driving a fair amount of the current public cloud investment as users look for increased storage and computing power.

As a result, Canalys has seen customers change their focus from concentrating on optimising cloud budgets to investing in projects that involve AI integration.

The first quarter saw a number of enterprise customers entering into long-term commitments with the large hyperscalers, indicating that some significant projects were being planned.

“The convergence of AI and cloud represents a transformative juncture, reshaping how businesses approach technology for innovation and growth,” said Alex Smith, vice-president at Canalys. “Businesses must navigate the complexities of optimising costs associated with AI infrastructure, including compute resources, storage and data processing, while ensuring that investments in AI technologies yield tangible returns.”

Period of reevaluation

Canalys has also noted that AI is causing customers to consider more than just their cloud choices, and many are reevaluating their entire technology stacks.

As AI starts to roll out across more of the infrastructure, there are opportunities for more workloads and data to be moved to the cloud.

That movement spells an opportunity for the channel, with many customers finding that transition of workloads far from straightforward and costly, opening the door for a trusted advisor that can smooth the process. “Looking ahead, cloud service providers as a whole will endeavour to capitalise on this trend by embedding AI in their products and solutions, making AI integration not something novel, but the norm,” said Smith.

All of the top three hyperscalers have been working hard on increasing channel activity, but they are also pitching slightly different offerings to the market, making customers opt for different flavours of public cloud.

“There is significant variation in the strategies of the top three hyperscalers, reflected in their differing growth rates,” said Canalys analyst Yi Zhang. “Microsoft’s end-to-end portfolio is proving to be a strong competitive moat, while Google’s strength in AI is giving it a strong tailwind. However, AWS’s recent US$4bn investment in Anthropic for generative AI and its ongoing AI integration in its cloud services underscores a determination to stay ahead of the pack as business priorities shift to AI.”

Earlier this week, CIF shared the findings from its Tough times, but innovation springs internal whitepaper, revealing that spending had continued among UK users.

The attractions of cloud continued to be the flexibility it gave around spending and the agility to spin up and down requirements.

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