Q1 cloud report: AWS leads, but Azure and Google Cloud are on the warpath

Canalys’ latest cloud infrastructure services report showed the cloud wars roiling as global spending grew 35 percent to US$41.8 billion in the first quarter of 2021, exceeding US$40 billion in a quarter for the first time.

The analyst company noted the continuing rise of using cloud services for data analytics and machine learning, data centre consolidation, application migration, cloud native development and service delivery. 

Total expenditure for the quarter was nearly US$11 billion higher than in Q1 2020 and nearly US$2 billion more than in Q4 2020, according to Canalys data. 

Over the last 12 months, organisations have been accelerating their digital transformation for working practices, customer engagement, and business process and supply chain dynamics. 

Customer confidence toward multi-year contract commitments has been bolstered by some economic recovery, vaccination programs, and the easing of restrictions.

AWS was the leading cloud service provider in Q1 2021, growing 32 percent on an annual basis to account for 32 percent of total spending. 

However, Microsoft Azure saw faster growth at 50 percent for the third consecutive quarter, taking 19 percent of the market share. 

Canalys stated that Microsoft’s investment in things like Arc for hybrid-IT control plane management, Synapse for analytics, AI-as-a-platform and the new industry clouds all contributed to this growth.

Google Cloud’s growth was beyond either of the top two at 56 percent for the quarter, bringing its market share to 7 percent.

The growth came from its Google One approach, Canalys said, driving cross-sell and integration opportunities across its portfolio. A focus on industry-specific solutions, AI/ML, analytics and data management also boosted cloud-native development and accelerated cloud migration among its customers.

“Cloud emerged as a winner across all sectors over the last year, basically since the start of the COVID-19 pandemic and the implementation of lockdowns. Organisations depended on digital services and being online to maintain operations and adapt to the unfolding situation,” said Canalys research analyst Blake Murray. 

“Though 2020 saw large-scale cloud infrastructure spending, most enterprise workloads have not yet transitioned to the cloud. Migration and cloud spend will continue as customer confidence rises during 2021. Large projects that were postponed last year will resurface, while new use cases will expand the addressable market.” 

Canalys identified investment at the edge, including 5G, as a key area of growth, especially for the development of ultra-low latency applications and use cases.

Competition among cloud service providers to capitalise on these opportunities will continue to intensify. 

“Geographic expansion for data sovereignty and to improve latency, either via full-region deployment or a local city point of presence, is one area of focus for the cloud service providers,” said Canalys chief analyst Matthew Ball. 

“But differentiation through custom hardware development for optimized compute instances, industry-specific clouds, hybrid-IT management, analytics, databases and AI-driven services is increasing. But it is not just a contest between the cloud service providers, but also a race with the on-premises infrastructure vendors, such as Dell Technologies, HPE and Lenovo, which have established competitive as-a-service offerings. The challenge will be demonstrating a differentiated value proposition for each.”