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Microsoft, Google, Alibaba eat into AWS’ market share in Q4 2019

Despite Amazon continuing to show significant annual growth in cloud sales from AWS, the firm’s market share has dipped ever so slightly as of Q4 2019, according to research firm Canalys. That’s because it faces increased competition from the likes of Microsoft, Google and Alibaba. 

In Q4 2018, it was estimated that Amazon took the lion’s share of cloud spending globally, with the firm commanding a market share of 33.4%. Microsoft followed in a distant second place at 14.9%, while Google and Alibaba both enjoyed less than 5% of the pie. In Q4 2019. Microsoft managed to significantly cut into Amazon’s lead, with the firm now holding 17.6% of all global cloud spending, likely helped by things such as the Pentagon’s JEDI contract. 

Fortunately for Amazon, it only lost 1% market share over the year period, dropping from 33.4% to 32.4%, meaning most of the share gains by Microsoft, Google and Alibaba largely came at the expense of smaller cloud operators. Also, despite its dip in market share, the firm enjoyed a nice boost in actual revenue, bringing in 9.8 billion compared to 7.3 billion in Q4 2018. 

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There’s no surprise that all of the big cloud service providers have been enjoying boosted sales. According to Canalys, total expenditure in 2019 exceeded US$107 billion, up from US$78 billion in 2018. This highlights the unrelenting expansion of the IT industry, driven by digital transformation initiatives across all industries. Organisations are increasing their spend on compute, storage and other on-demand cloud-based services to analyse and interpret growing datasets and to meet internal DevOps needs as they build new applications and services.

“Organisations across all industries, from financial services to healthcare, are transitioning to being technology providers,” said Canalys chief analyst, Alastair Edwards. 

“Many are using a combination of multi-clouds and hybrid IT models, recognising the strengths of each cloud service provider and the different compute operating environments needed for specific types of workloads.

“Customer engagement is starting to mature, with more organisations committing to longer-term multi-year agreements with cloud service providers, as they move from ad-hoc and uncontrolled use to a more managed and predictable approach. 

“The role of channel partners will become more important, as cloud use increases, in terms of defining application strategies, integration into business processes, optimising user experiences, governance and compliance, as well as securing data and workloads.”

The trend toward operating more applications, both new and existing, in public cloud environments, will continue over the next five years, according to Canalys. Organisations will look to take advantage of the unlimited access to capacity, more advanced services, such as AI and analytics, as well as APIs and other tools to accelerate their digital development. Cloud infrastructure services spending is estimated to grow 32% in 2020 to $141 billion. Momentum will continue, with total outlay reaching US$284 billion in 2024, Canalys says. 

The growing demand for cloud services is placing more pressure on the underlying data centre infrastructure. 

“Cloud service providers are having to carefully manage capital expenditure to balance rising costs with the need to add more capacity, expand geographically and refresh existing assets,” said Canalys principal analyst, Matthew Ball. 

“The ‘super seven cloud builders’ – Alibaba, Amazon, Baidu, Facebook, Google, Microsoft and Tencent – collectively spent more than $60 billion in 2019 on data centre infrastructure. This was up 8% from 2018 and represented a moderation in capital expenditure after the surge in 2018, when the super seven increased their outlay by 46%. 

“Increasing cost pressures combined with performance advances are extending the average life of servers in cloud service provider environments beyond the typical three-year period. But cloud service providers will remain the largest buyers of servers and related components over the next five years.”

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