The news: The top three public cloud providers experienced losses in the cloud this spring as the downpour of economic uncertainty showed no signs of moving on.
- Spending on Amazon Web Services (AWS), Microsoft Azure, and Google Cloud fell in April compared with Q1 due to business customers cutting costs, per Insider.
- AWS, with a 38.9% market share, dropped by about 4 percentage points in April, while Microsoft, with 21.2%, fell by 2 percentage points. Google, which has 7.1% of the market, lost 8 percentage points.
- Companies like Coinbase, which laid off 18% of its employees last week, have announced cloud spending cuts.
- However, some forecasters say the public cloud will become more attractive to enterprises over the next year, with cloud providers spending 25% more on data center infrastructure in 2022, per The Register.
- The top four cloud providers, which includes Alibaba Cloud, are expected to expand services to as many as 30 new regions this year.
Cloud costs aren’t cheap: Many companies are spending thousands of dollars a month, and some, like Airbnb and Snapchat, are spending millions. When looking at areas to cut costs, some may view the cloud as an easier area to trim versus core operations or overhead.
- Recent cloud rate hikes and cryptic billing strategies have likely prompted companies to scrutinize their cloud spending. But with many locked into cloud contracts, a certain amount of spending will be necessary.
- Some enterprises could consider building their own on-site infrastructure and moving their data away from the cloud, but it probably won’t be the main trend.
- Such infrastructure also comes with costs, and at a time of layoffs in the tech world, companies may not want to hire new talent to build and maintain it.
The bigger picture: The slip in cloud spending is a symptom of broader economic contraction. While it has hit the tech industry hard, it doesn’t spell the end of cloud growth.
- Higher computing demands associated with AI, ML, complex simulations, and the metaverse will keep public cloud demand afloat.
- But major cloud providers will have to work harder to retain customers and attract new ones with discounts and incentives.
- The economic uncertainty also bodes well for cloud cost-management platforms like Finout that help companies reduce wasteful spending.
- We’ll likely see more multicloud approaches as customers shop around for the best rates for select services.