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Cloud Had a Banner Quarter Despite Top Vendors Slowing Down

Spending on cloud services reached a new high in the second quarter due to COVID-19 lockdowns driving offices around the world to untether their critical applications from office-bound infrastructure.

Cloud infrastructure spending in Q2 surpassed $30 billion, according to separate reports from Canalys and Synergy Research Group (the reports were released last week, after all of the major cloud vendors released their latest earnings reports). Canalys calculated spending for the period to be $34.6 billion, an increase of over $8 billion from the same time last year and the market's "largest quarterly expansion in terms of US dollars."

Synergy projects that the cloud market will grow over 30 percent by the end of 2020. That's actually slower than in previous years, the firm noted, but it explained that the slowdown is a natural result of market saturation, not of diminishing demand.

"As enterprises struggle to adapt to new norms, the advantages of public cloud are amplified," said Synergy chief analyst John Dinsdale in a statement. "The percentage growth rate is coming down, as it must when a market reaches enormous scale, but the incremental growth in absolute dollar terms remains truly impressive."

The market share standings of the top cloud vendors remain unchanged. Amazon Web Services (AWS) is still the runaway leader, with about a third of the overall market, according to both firms. Microsoft Azure is in second place, with about a fifth of the overall market. In a distant third place is Google, with less than a tenth of the market.

Each of the Top 3 reported decelerating growth in their latest earnings reports. AWS, for instance, grew by only 29 percent, its smallest year-over-year increase on record. According to analysts, this may be a sign that the pandemic economy is pushing organizations to reduce their cloud costs even as they use more of it.

To increase their customer wins over the course of the pandemic, and especially after, the top vendors will need to differentiate themselves from each other, according to Canalys research analyst Blake Murray. "Differentiation among the leading providers will be critical as competition for customer's spending on digital transformation projects intensifies."

Murray identified security, multicloud and hybrid support, migration and code development, and cloud cost management as "key areas of focus" for organizations choosing between cloud providers.

About the Author

Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.

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