Pandemic, Partners Drove Late-2020 Cloud Boom
Spending on cloud infrastructure services accelerated dramatically in the end of 2020, driven by pandemic-related business adjustments and the growing influence of channel partners.
Globally, organizations spent $39.9 billion in cloud services in the fourth quarter, an increase of over $3 billion from Q3. That's based on new data from market researcher Canalys, which characterized the jump as the industry's "largest quarterly expansion in dollar terms." (Another market researcher, Synergy, separately released its own Q4 cloud market analysis and arrived at similar numbers: $37 billion in total Q4 spend, up $4 billion from Q3.)
Cloud market leader Amazon Web Services (AWS) accounted for nearly a third of overall cloud spending in Q4, according to Canalys. "After a mixed Q3 in terms of customer performance, AWS had a resurgence in customer investment," the company said. That resurgence resulted in AWS reporting $12.7 billion in revenue for Q4, a 28 percent year-over-year increase. Microsoft Azure, the No. 2 cloud platform, is estimated to have grown by 50 percent year-over-year, catapulting its market share to 20 percent.
Unsurprisingly, Canalys attributed much of the cloud's late-2020 market strength to adjustments that organizations continued to make amid the ongoing COVID-19 pandemic. As public lockdowns persisted around the world, cloud-based collaboration tools became critical to the long-term viability of remote-work and remote-education scenarios. Meanwhile, consumers spending more time at home meant streaming media and gaming services were in high demand.
Additionally, IT modernization projects that might have been put on hold at the start of the lockdowns began to gather steam again toward the end of the year.
"The rate of digitalization, led by cloud, is gathering pace. Companies are now more confident about releasing budgets for business transformation," said Canalys research analyst Blake Murray in a prepared statement. "Large projects that were postponed earlier in the year are being re-prioritized, led by application modernization, SAP migrations and workplace transformation. Healthcare, financial services and pharmaceuticals are among the industries leading the way, but even those under most pressure are diverting investments to cloud, opening up new revenue streams and diversifying business models."
Besides the pandemic, Canalys identified another contributor to the cloud boom: channel partners. Technology partners are becoming increasingly important to businesses as many of them navigate their first cloud deployments, from assessment to implementation to support. Companies that are already in the cloud will likely still need consultation from partners to help them on their 2021 digitization projects.
"As organizations start to consider moving more mission-critical workloads to the cloud, they will look to partners to define the right cloud platforms and strategies, as well as solve the most pressing issues around cost management, security, sovereignty and hybrid IT integration," said Canalys chief analyst Alastair Edwards.
Recognizing the importance of their partners in attracting customers, driving consumption and providing support, the top cloud providers are in turn investing more heavily in their channels. While Microsoft "holds the largest share of the indirect channel with Azure," the partner channels for AWS and Google Cloud are also growing, Canalys noted. AWS in particular recently announced enhancements to its AWS Partner Network (APN) offerings, including more resources for independent software vendors (ISVs), new competencies and a broader partner marketplace.
Partners with expertise in multiple platforms are also gaining favor as businesses increasingly look to leverage different combinations of the public, private and edge clouds.
"Customer digital transformation projects are highly complex, requiring advanced consulting skills, combining deep technical skills with vertical expertise, which the cloud service providers are relying on partners to provide at scale," Edwards said. "They are also turning to their partners to drive cloud consumption, and deliver full customer lifecycle support."