Global cloud spending is expected to increase by 20% in 2024, according to new research from Canalys.
Analysis from the consultancy points to an optimistic outlook in the industry for the year ahead off the back of a 19% year on year (YoY) growth rate recorded in Q4 of 2023, with total spending reaching $78.1 billion.
Canalys said this marked an increase of $12.3 billion, with the total cumulative yearly increase of 2023 amounting to $290.4 billion - up from $247.1 billion in 2022.
A key factor in the increase, according to Canalys, is that the “influence of enterprise IT optimization” is fading. As a result of this, more customers are building on their commitments with hyperscalers in anticipation of heightened consumption requirements over the coming year.
Cloud migration projects are also picking up speed in tandem with an increasing surge in the adoption of artificial intelligence (AI), Canalys said.
Hyperscalers in particular are focusing on generative AI investment with an expectation that it will enhance cloud computing capabilities.
Cloud spending shows the ‘slowdown’ might be over
The latest analysis from Canalys points toward a more optimistic outlook in the year ahead for both enterprises and providers alike.
In January 2023, industry analysts warned of a potentially disastrous “cloud slowdown” as enterprises cut spending on cloud services due to tightening budgets and increased economic uncertainty.
But research from Gartner in late 2023 found that while budgets were still tight, many organizations viewed proactive investment in the cloud as a means of weathering troubling economic conditions and preparing for future success.
The consultancy predicted a similar spending boost of 20% in 2024 and beyond.
Sid Nag, VP analyst at Gartner, told ITPro at the time that cloud has become “essentially indispensable”, adding that many enterprises have come to accept that neglecting investment in this business domain could create longer-term challenges and impact their ability to compete.
How the hyperscalers are performing
Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure all saw varying degrees of growth due to cloud spending increases, according to Canalys.
Though accounting for the smallest amount of growth in 2023, AWS still leads the pack in cloud infrastructure, dominating the market and accounting for 31% of total market spend.
After a few quarters of slowing growth, AWS also saw a small upward trajectory in 2023 with a revenue increase of 13%. Its future committed spending by customers now stands at $155.7 billion, a YoY increase of about $45 billion.
“AWS has been slower than its key competitors to make AI advances, which may explain why its growth is not accelerating as rapidly as that of Azure and GCP,” said Yi Zhang, analyst at Canalys.
Microsoft Azure is the second in line in terms of size, now claiming an enhanced market share of 26% as of Q4 2023. This compares to 23% in Q4 2022.
This can be attributed in part to an increased level of AI adoption, according to Canalys, as Azure has been expanded to support the entire suite of OpenAI’s large language models (LLMs).
GCP, on the other hand, grew to account for 10% of the market, accumulating $74.1 billion in revenue backlog by December 2023. This is up from $64.3 billion at the close of 2022, a significant sum for the comparatively smaller cloud computing service provider.
Google has also maintained its focus on expanding channel partnerships to drive growth, tripling the number of its “co-sell deals” since 2022.
