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Cloud wins big in Q1 2020 as remote work drives record demand
Fri, 1st May 2020
FYI, this story is more than a year old

While economies struggle, industries suffer and businesses close across the world due to the economic fallout from COVID-19, one industry is thriving in the chaos: cloud services.

According to Canalys, cloud infrastructure services spending grew 34% in Q1 2020, hitting US$31 billion in the quarter.

It comes as cloud giants, like Microsoft Azure and AWS, record overall growth in Q1 - in large part due to the rampant success of the cloud during pandemic.

The great shift into remote working as lockdown measures came into place in March facilitated growth in cloud service demand – enterprises sought rapid access to compute resources, and remote working tools hosted on clouds became essential.

Additionally, a surge in demand for online collaboration tools, eCommerce and consumer cloud services drove sharp increases in cloud infrastructure consumption, benefiting all the major cloud providers.

But, according to Canalys, this was offset by a slowdown in large complex enterprise migrations and transformational cloud projects as businesses called a halt to all but the most important IT tasks as lockdowns took effect.

And the demand that would usually come from industries like hospitality and tourism, which have suffered immense losses, dropped off.

Amazon's AWS maintained its leading position in cloud services, accounting for 32% of the total market in Q1 as sales grew 33%. The cloud giant outpaced its competitors in dollar terms too, according to Canalys.

Microsoft's Azure sales increased 59%, taking its share to 17%.

Capacity limits were reached for Azure in certain markets, though this was due to unprecedented use of Microsoft Teams, which did not have a direct impact on Azure revenue.

This also forced Microsoft to restrict consumption for some services and new customers.

Google Cloud held onto third place in the worldwide cloud infrastructure market in Q1 2020, followed closely by Alibaba Cloud.

Both had a 6% share of the total cloud infrastructure services market. Google Cloud saw healthy adoption of its data and analytics platform in some of its key verticals, led by the public sector, healthcare, service providers and financial services, though this was partially offset by weakness in other segments.

“This is uncharted territory for cloud service providers, giving a boost to consumption but creating new and often challenging customer dynamics,” says Canalys chief analyst Alastair Edwards.

“Cloud has become an essential tool to support business continuity in these difficult times. Many organisations have turned to the public cloud for its burst capabilities to meet a sudden spike in use.

“Platforms such as Zoom would not have been able to operate without the flexible infrastructure provided by the major cloud providers.

Despite rampant its successes, the cloud industry faces a serious issue – ensuring capacity is expanded to cater for the surge in cloud consumption.

Microsoft has announced new server capacity to its data centers in the worst-affected regions, while AWS has opened two new data center regions in Cape Town and Milan.

Google Cloud plans to open four new data centers in Asia, Canada and the Middle East, while Alibaba Cloud revealed its plan to invest $28 billion into its cloud services over the next three years.

“Anything on-premises that does not improve current business continuity initiatives has taken a back seat as companies rethink budgets in the face of growing uncertainty or struggle to access physical data centers,” says Canalys chief analyst Matthew Ball.

“At the same time, companies around the world urgently need access to flexible compute capacity to support remote working, collaboration, online commerce and security.

“Cloud infrastructure is an obvious short-term solution. This has been a boon for most if not all the major players."