As organisations prioritise digitalisation strategies, worldwide cloud infrastructure services spending grew 34 per cent year-on-year in Q1 2022 to reach $55.9 billion, according to a report by Canalys. As per the latest Canalys data, it is estimated that expenditure was over $2 billion more than in the previous quarter and $14 billion more than in Q1 2021.

This comes as the cloud-enabled business transformation has become a priority for organisations as they face global supply chain issues, cybersecurity threats, and geopolitical instability.

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“Organisations of all sizes and vertical markets are turning to the cloud to ensure flexibility and resilience in the face of these challenges,” the report said.

“At the same time, infrastructure hardware shortages and the threat of further price inflation has spurred many large enterprises to invest in large-scale, multi-year cloud contracts to lock in upfront discounts with the hyperscalers,” it said.

Rise in orders

All the major cloud providers have seen a significant rise in order backlogs as a result, which now total several hundred billion dollars globally. “This in turn is driving the importance of cloud marketplaces as a sales channel for third-party software and security, as businesses seek to burn down these cloud commitments, further fueling infrastructure consumption,” it said.

“Cloud has continued to be a hot market and transformation strategies are emphasizing digital resiliency to face the market challenges of today and tomorrow,” said Canalys Research Analyst Blake Murray. “To be effective in resiliency planning, customers are turning to channel partners with the technical and consulting skills to help them effectively embrace hyperscaler cloud services,” added Murray.

Top players

As per the report, increased adoption and scale have benefited the top three cloud service providers which collectively grew 42 per cent y-o-y, accounting for 62 per cent of global customer spend. “Top cloud partners are doubling down on certification efforts and skills recruitment around hyperscaler cloud services,” it said.

“Global systems integrators, including Accenture, Atos, Deloitte, HCL Technologies, TCS, Kyndryl, Tech Mahindra, and Wipro, are building practices with tens of thousands of cloud engineers and consultants. This has also included acquisitions of cloud application development and migration specialists, as well as the launch of new dedicated cloud services brands. Smaller consultants, resellers, service providers, and distributors are pursuing similar strategies as mid-market and SMB customers also demand support with cloud adoption,” it added.

“As the use cases for cloud infrastructure services expand so does the potential complexity, and we see that hybrid and multi-cloud deployments are commonplace in the market. The hyperscalers are investing in rapid channel development and partners are responding as the opportunities grow,” said Canalys Research Analyst Yi Zhang.

Amazon Web Services (AWS) was the top cloud service provider in Q1 2022, accounting for 33 per cent of total spending and growing 37 per cent on an annual basis.

“It continued to expand its global presence, launching 16 Local Zones in the US and announcing plans to add 32 more local zones across 26 countries. AWS announced key client wins with a focus on telecommunications companies like T-Systems, Verizon, and Telefónica. It also advanced its relationship with Tech Mahindra to power an automation platform to accelerate 5G network adoption for telecommunications companies,” it said.

Microsoft Azure came in second, growing by 46 per cent to gain a 21 per cent market share in Q1 2022. The growth has been driven by an acceleration in large, long-term cloud contracts. Microsoft has doubled the number of Azure contracts by over $100 million compared with Q1 last year.

“Microsoft is also heavily gearing its new Cloud Partner Program, unveiled last month and launching in October, to boost Azure business through the channel. Amid wide-ranging (and controversial) channel program changes in Microsoft’s New Commerce Experience (NCE), the Cloud Solution Provider program has reached phase two of its deployment, with changes to Azure offerings and new partner credits and incentives. It also announced key wins with global systems integrators, including Atos and Fujitsu,” as per the report.

Fastest growing platform

Google Cloud was the fastest-growing among the top three, growing by 54 per cent in the latest quarter to account for 8 per cent market share. “It continues to focus on digital sovereignty, analytics, AI, and cybersecurity as key differentiators for GCP, advancing its cloud cybersecurity practice with the acquisition of Mandiant, which should close later this year,” said Canalys.

It is investing heavily in expanding its regional data center footprint around the world while partnering with the likes of Mahindra to migrate its data centers to GCP. “Google Cloud also continues to turn to channel partners for greater customer reach, scale, and sales efficiency as it seeks to reduce operating losses in its cloud business,” it added.

Its operating losses in the cloud business reached $931 million in Q1 2022. It has announced a reshuffle to bring together its ecosystem and channel sales teams and pledged to double spend on its partner ecosystem over the next few years, including co-marketing and training.

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 does not include software-as-a-service expenditure directly but includes revenue generated from the infrastructure services being consumed to host and operate them.

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