In 2023, inflationary pressures and challenging macroeconomic conditions will have a push-and-pull effect on cloud computing spending in the UK and globally.
Despite this, spending on cloud services is expected to rise by more than a fifth this year, according to a report released in February by industry analysts Canalys. Even with current global economic uncertainty, Canalys expects worldwide cloud infrastructure services spending to increase by 23% for 2023.
According to the report, worldwide cloud infrastructure services expenditure grew 23% year on year in Q4 2022 to reach US$65.8 billion. In 2022, total cloud infrastructure services spending increased by 29%, reaching $247.1 billion, up from $191.7 billion in 2021.
A challenging Q4
In late 2022, worsening macroeconomic conditions and talk of recession prompted a slowdown in the volume and pace of migration to the cloud. Quarterly growth in cloud spending was lower in Q4, 2022 at 23% compared to 34% in Q1 2022.
2023 outlook
As we head into Q2, the cloud services market appears less affected than many other sectors. In Q1 of 2023, businesses continue to undergo rapid digital transformation. With hybrid and remote working options now the norm, many companies continue to turn to the cloud to help manage this transition.
While demand for cloud services continues, the growth rate for cloud infrastructure services is predicted to slow. This is in part due to rising public cloud costs, fuelled by inflation, and businesses adopting a more conservative approach to IT budgets. Customers are also adjusting cloud strategies for greater efficiency and control.
One thing is clear: businesses can only spend what they have. Cloud spending could decrease if IT budgets shrink, as cloud services continue to be the largest portion of IT spending.
Big cloud spenders
While there might be an overall slowdown in spending, the sector accelerates at a respectable rate, with the usual suspects continuing to perform strongly. In terms of the top cloud service providers, three providers accounted for 65% of the total market in 2022, while the remaining players in the market took the other 35%.
- Amazon Web Services (32%)
- Microsoft Azure (23%)
- Google Cloud (10%)
Amazon Web Services 2022 vs. 2023
Amazon Web Services (AWS) led the cloud infrastructure services market in Q4 2022. According to estimates from Canalys, it grew by a fifth (20%) in 2022. This was an all-time low growth rate for AWS.
The tech giant continues to invest to expand its reach and attract new customers. In Q1 of 2023, the company announced new customer wins, including Nasdaq, Yahoo, and Descartes Labs. Moreover, there are AWS regions in Spain and Switzerland and a second region in India.
Azure 2022 vs. 2023
The decline in enterprise customers’ spending, combined with rising server energy and operating costs, had a negative impact on profitability. Yet, Microsoft Azure held 23% of the global cloud infrastructure services market and remained the second-largest provider.
Azure continues to be a strong contender in the hybrid computing market with Azure Arc as more customers move to hybrid cloud services. The company has 12,000 Azure Arc customers, double the number a year ago, including Citrix and PayPal.
Google Cloud 2022 vs. 2023
Google Cloud was the third largest cloud service provider. In 2022, they onboarded customers including Siemens Energy and Intel, which brought in steady revenue growth.
Today, their products and go-to-market strategy are helping to drive customer momentum. To drive growth in 2023, Google Cloud has committed to deeper engagement with its channel partner community. In a bid to improve profitability, Google Cloud has announced an initiative to extend the life cycle of its servers and networking equipment to six years.
The outlook
Despite global economic uncertainty, the cloud market continues to grow in all regions of the world. Cloud services can support growth during uncertain times due to their agile and scalable nature. Cloud computing will remain in demand for its safety and innovation.
The transition to the cloud continues to be a reality, but specialist resources can be hard to find. NU Concept Solutions is at the forefront of the supply of top-tier cloud resources. We are committed to helping busy hiring managers grow their cloud teams while enabling candidates to boost their careers.
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