Covid-19: Q1 cloud infrastructure spend at $31 bln on higher remote work access

MUMBAI: Global technology giants Amazon Inc, Microsoft and Google continued to witness strong growth in the cloud infrastructure market during January-March as more and more establishments turned to remote access to work in the backdrop of covid-19 induced lockdowns.

"Cloud infrastructure services spend hit yet another record in Q1 2020, growing 34% (YoY) to $31 billion. Growth in cloud services was driven by organisations around the world moving to remote working as the COVID-19 pandemic hit. As a result, enterprises sought rapid access to compute resources in the face of lockdowns and disruption,” said a report by Canalys, an independent technology research firm.

AWS maintained its position as the leader in cloud services, accounting for 32% of the total market in Q1 as sales grew 33%. Sales of Azure rose 59%, taking its market share to 17%. Azure hit the limit in some markets, though this was due to the unprecedented use of Teams, which did not have a direct impact on Azure revenue. This also forced Microsoft to restrict consumption of some services and new customers.

“Google Cloud, including GCP and G Suite, revenues were $2.8 billion for the first quarter, up 52% year-over-year, driven by significant growth at GCP and ongoing strong growth at G Suite. Once again, the growth rate at GCP was meaningfully higher than that of Cloud overall. GCP growth was led by our infrastructure offerings and our data and analytics platform,” said Ruth Porat, chief financial officer (CFO), Alphabet - parent of Google.

While Google Cloud reported maximum growth, it is fair to note that it grew on a much smaller revenue base than Microsoft and AWS which have been market leaders for some time.

Canalys noted a surge in demand for online collaboration tools, e-commerce and consumer cloud services drove sharp increases in cloud infrastructure consumption, benefiting all the major cloud providers. But this was offset by a slowdown in large complex enterprise migrations and transformational cloud projects as businesses called a halt to all but the most important IT tasks as lockdowns took effect. Demand from digital companies that were hit by the lockdowns in sectors such as hospitality and travel was also impacted.

Google Cloud continues to invest in an aggressive hiring strategy for Google Cloud Platform, across both enterprise sales and technical resources. Alibaba Cloud launched a Global SME Enablement Program to provide cloud technology relief worth more than $30 million to new and existing small and medium-enterprise (SME) customers around the world and equip them with the solutions needed to maintain business continuity amid the covid-19 pandemic.

While globally cloud growth has come from every possible region, companies observed that the SMEs are struggling to stay afloat and hence curbing spends. SMEs, especially across the Asia Pacific region, are the chief growth markets for these companies.

In India, each of the top cloud providers as well as domestic peers have announced multiple partnerships with telcos, enterprises etc to reach this growth market which is now threatened by economic slowdown.

Cloud service providers have been responding urgently to the surge in consumption. Microsoft announced an emergency plan, which included adding new server capacity to its data centers in the worst-affected regions. AWS opened two new data center regions in April, in Cape Town and Milan, with more planned in the coming quarters. Google Cloud unveiled plans to open four new cloud data centers in Asia (including Mumbai), Canada and the Middle East. Alibaba Cloud unveiled a $28 billion investment to expand its cloud business worldwide over the next three years.