Cloud hype slowly flattening out

After the extreme increase in usage during the Corona pandemic, cloud providers are now reporting slower growth in their services. However, the cloud remains one of the largest growth segments in the entire IT services sector.

In the wake of the Corona pandemic, digitization – and consequently the use of cloud services – has advanced strongly. The latest earnings announcements from major companies such as Microsoft, Google and Amazon show that the rapid growth in the cloud sector is now leveling off. However, a slowdown in the use of cloud services is far from in sight:

“It’s very hard to grow a large number of companies. So growth will flatten out a bit, but it won’t decline at all. It’s still one of the biggest growth segments in the whole IT services space.”
– Sid Nag (Vice President Analyst at Gartner)

Cloud growth: numbers check

Microsoft announced in its latest earnings release that revenue from Azure and other cloud services grew 31 percent. This compares to 35 percent growth last quarter.

Google’s cloud revenue grew 32 percent year-over-year in Q4 2022 – compared to 38 percent growth in the previous quarter.

Amazon’s AWS net revenue grew 20 percent in the latest quarter, compared to 28 percent in Q3. Brian Olsavsky, Amazon’s CFO, commented, “Starting midway through Q3 2022, our year-over-year growth rates slowed as companies of all sizes looked at ways to optimize their cloud spending in response to challenging macroeconomic conditions.”


Other reasons for the Cloud hype slowly flattening

Contributing to the flattening cloud growth is, of course, the reason already cited that it is becoming increasingly difficult to add to the already large user base. But on the other hand, the difficult macroeconomic conditions and lack of expertise are also likely to have an impact here.

Dan O’Brien (senior vice president of technology solutions at consulting firm Presidio) sees customers questioning their cloud growth. Should they continue to spend money? Have they written applications to use the services effectively? Should they rewrite them? Or shut down the services?

They may also lack the expertise needed to implement complex cloud architectures, according to O’Brien: “They have this pent-up demand because they’re not able to create a strategic plan for what applications to move and what to do with them, and they don’t have the expertise to create the right startup zones and infrastructure in the cloud.”

Many companies also seem to already be aware of the need for cloud engineers: a survey by job board Indeed found that job postings were up 65 percent year-over-year.

Further, however, there is also a lack of expertise in an emerging technology that is currently attracting the attention of major cloud providers: Artificial Intelligence. Microsoft already announced the integration of AI into its Bing search engine and Edge browser, while Google introduced its competitor in the chatbot arena: Bard. Learn more.

Source: IT Brew