Hyperscalers shift focus to services, channels as chip crunch looms

L-R: Adam Selipsky (CEO - AWS); Satya Nadella (CEO - Microsoft), Thomas Kurian (CEO - Google Cloud)

Global cloud hyperscalers are shifting their focus to advancing industry-specific service portfolios and growing their channels to help bring their products to market, according to new analysis.

This shift comes as data centre component providers begin to see longer lead times due to the impact of the ongoing global chip shortage, with higher component prices being passed on to the largest cloud providers, research by analyst firm Canalys suggests.  

At the same time, cloud services spending is still being affected by the digital transformation efforts required to maintain business continuity during pandemic-related disruptions.

In addition to advancing vertical-specific service portfolios and building their respective channel plays, the major global cloud services providers are responding to the broader market trends by emphasising geographic data centre expansion to meet rising demand.  

Against this backdrop, worldwide cloud services spending increased by 35 per cent to US$49.4 billion during the third quarter of this year, driven by a range of factors, including ongoing remote working and learning, as well as the growing use of industry-specific cloud applications.  

Canalys defines cloud infrastructure services as those that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared infrastructure.

The analyst firm’s latest estimates show that cloud infrastructure services expenditure has grown by US$12.9 billion over the corresponding quarter last year and US$2.4 billion since the prior quarter this year.

“Overall compute demand is out-growing chip manufacturing capabilities and infrastructure expansion may become limited for the cloud service providers,” said Canalys research analyst Blake Murray.  

“Besides managing supply chains to the best of their abilities, the providers building an advantage are focused on developing their go-to-market channels along with their product portfolios to catch up with an increasingly wide variety of customer use cases that has fueled demand since the start of the pandemic,” he added.

As usual, Amazon Web Services (AWS) topped the rankings during the quarter in terms of market share, claiming 32 per cent of total cloud infrastructure services spend in the three months to 30 September this year. AWS grew 39 per cent on an annual basis in the quarter.

AWS is one of the hyperscalers noted by Canalys that is making an effort to advance its vertical service portfolios, with the company announcing its AWS for Health offering in July.

The cloud giant describes its Health offering as a portfolio of “curated AWS services and AWS Partner Network solutions used by thousands of healthcare and life sciences customers globally”.

Canalys points out that AWS has also been leading channel development through its competency programs, with its government competency becoming the largest industry-focused competency among its partners.

Microsoft Azure, meanwhile, was the second largest cloud service provider in Q3, claiming 21 per cent of the global market share and growing over 50 per cent for a fifth consecutive quarter.  

During the quarter Microsoft also continued to focus on industry-specific cloud service customisations and expanded capabilities, specifically in the financial services and manufacturing verticals.  

In October, Microsoft revealed it would make its financial services cloud solution generally available on 1 November.  

Known as Microsoft Cloud for Financial Service, it is designed to provide a faster pathway to modernise core banking services, develop deep analytics and enable new ways to reach customers. Public preview of the offering arrived on 31 March.

The third quarter also saw Microsoft report new customer success in its cloud service suites for healthcare and sustainability.  

Meanwhile, Google Cloud was the third largest provider globally, growing 54 per cent to account for 8 per cent of the market.  

During the quarter, Google Cloud announced 20 expanded technology partnerships with data and cyber security companies to deepen vertical expertise, Canalys noted.  

Like AWS and Microsoft, Google Cloud has also emphasised its channel partners, releasing new incentives in its partner program.

The company is seeing a lot of new action via its partner channels, advertising a 175 per cent increase in customer engagements through partners during the first half of 2021, according to Canalys.

The vendor is also working to advance its positioning around data sovereignty with the release of Google Distributed Cloud, which gives customers options to extend Google Cloud’s infrastructure to the edge and customer data centres.

Earlier this month the vendor detailed new solutions consisting of hardware and software designed to extend the vendor’s infrastructure to the edge and into users’ own data centres.

Dubbed Google Distributed Cloud, the new offering can be used to migrate or modernise applications and process data locally with Google Cloud services, including databases, machine learning, data analytics and container management.