Mar
19
2021
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Cloud infrastructure spending passed on-prem data centers in 2020

There is a prevailing notion that while the cloud infrastructure market is growing fast, the vast majority of workloads remain on premises. While that could be true, new research from Synergy Research Group found that cloud infrastructure spending surpassed on-prem spending for the first time in 2020 — and did so by a wide margin.

“New data from Synergy Research Group shows that enterprise spending on cloud infrastructure services continued to ramp up aggressively in 2020, growing by 35% to reach almost $130 billion. Meanwhile enterprise spending on data center hardware and software dropped by 6% to under $90 billion,” the firm said in a statement.

While the numbers have been trending toward the cloud for a decade, the spending favored on-prem software until last year when the two numbers pulled even, according to Synergy data. John Dinsdale, chief analyst and research director at Synergy says that this new data shows that CIOs have shifted their spending to the cloud in 2020.

“Where the rubber meets the road is what are companies spending their money on, and that is what we are covering here. Quite clearly CIOs are choosing to spend a lot more money on cloud services and are severely crimping their spend on on-prem (or collocated) data center assets,” Dinsdale told me.

Chart comparing on prem spending to cloud infrastructure spending from Synergy Research.

Image Credits: Synergy Research Group

The total for on-prem spending includes servers, storage, networking, security and related software required to run the hardware. “The software pieces included in this data is mainly server OS and virtualization software. Comparing SaaS with on-prem business apps software is a whole other story,” Dinsdale said.

As we see on-prem/cloud numbers diverging in this way, it’s worth asking how these numbers compare to research from Gartner and others that the cloud remains a relatively small percentage of global IT spend. As workloads move back and forth in today’s hybrid world, Dinsdale says that makes it difficult to quantify where it lives at any given moment.

“I’ve seen plenty of comments about only a small percentage of workloads running on public clouds. That may or may not be true (and I tend more toward the latter), but the problem I have with this is that the concept of ‘workloads’ is such a fungible issue, especially when you try to quantify it,” he said.

It’s worth noting that the pandemic has led to companies moving to the cloud much faster than they might have without a forcing event, but Dinsdale says that the trend has been moving this way over years, even if COVID might have accelerated it.

Whatever numbers you choose to look at, it’s clear that the cloud infrastructure market is growing much faster now than its on-premises counterpart, and this new data from Synergy shows that CIOs are beginning to place their bets on the cloud.

Sep
17
2020
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APAC cloud infrastructure revenue reaches $9B in Q2 with Amazon leading the way

When you look at the Asia-Pacific (APAC) regional cloud infrastructure numbers, it would be easy to think that one of the Chinese cloud giants, particularly Alibaba, would be the leader in that geography, but new numbers from Synergy Research show Amazon leading across the region overall, which generated $9 billion in revenue in Q2.

The only exception to Amazon’s dominance was in China, where Alibaba leads the way with Tencent and Baidu coming in second and third, respectively. As Synergy’s John Dinsdale points out, China has its own unique market dynamics, and while Amazon leads in other APAC sub-regions, it remains competitive.

“China is a unique market and remains dominated by local companies, but beyond China there is strong competition between a range of global and local companies. Amazon is the leader in four of the five sub-regions, but it is not the market leader in every country,” he explained in a statement.

APAC Cloud Infrastructure leaders chart from Synergy Research

Image Credits: Synergy Research

The $9 billion in revenue across the region in Q2 represents less than a third of the more than $30 billion generated in the worldwide market in the quarter, but the APAC cloud market is still growing at more than 40% per year. It’s also worth pointing out as a means of comparison that Amazon alone generated more than the entire APAC region, with $10.81 billion in cloud infrastructure revenue in Q2.

While Dinsdale sees room for local vendors to grow, he says that the global nature of the cloud market in general makes it difficult for these players to compete with the largest companies, especially as they try to expand outside their markets.

“The challenge for local players is that in most ways cloud is a truly global market, requiring global presence, leading edge technology, strong brand name and credibility, extremely deep pockets and a long-term focus. For any local cloud companies looking to expand significantly beyond their home market, that is an extremely challenging proposition,” Dinsdale said in a statement.

May
01
2020
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In spite of pandemic (or maybe because of it), cloud infrastructure revenue soars

It’s fair to say that even before the impact of COVID-19, companies had begun a steady march to the cloud. Maybe it wasn’t fast enough for AWS, as Andy Jassy made clear in his 2019 Re:invent keynote, but it was happening all the same and the steady revenue increases across the cloud infrastructure market bore that out.

As we look at the most recent quarter’s earnings reports for the main players in the market, it seems the pandemic and economic fall out has done little to slow that down. In fact, it may be contributing to its growth.

According to numbers supplied by Synergy Research, the cloud infrastructure market totaled $29 billion in revenue for Q12020.

Image Credit: Synergy Research

Synergy’s John Dinsdale, who has been watching this market for a long time, says that the pandemic could be contributing to some of that growth, at least modestly. In spite of the numbers, he doesn’t necessarily see these companies getting out of this unscathed either, but as companies shift operations from offices, it could be part of the reason for the increased demand we saw in the first quarter.

“For sure, the pandemic is causing some issues for cloud providers, but in uncertain times, the public cloud is providing flexibility and a safe haven for enterprises that are struggling to maintain normal operations. Cloud provider revenues continue to grow at truly impressive rates, with AWS and Azure in aggregate now having an annual revenue run rate of well over $60 billion,” Dinsdale said in a statement.

AWS led the way with a third of the market or more than $10 billion in quarterly revenue as it continues to hold a substantial lead in market share. Microsoft was in second, growing at a brisker 59% for 18% of the market. While Microsoft doesn’t break out its numbers, using Synergy’s numbers, that would work out to around $5.2 billion for Azure revenue. Meanwhile Google came in third with $2.78 billion.

If you’re keeping track of market share at home, it comes out to 32% for AWS, 18% for Microsoft and 8% for Google. This split has remained fairly steady, although Microsoft has managed to gain a few percentage points over the last several quarters as its overall growth rate outpaces Amazon.

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