Amazon Increases Sunny Sales Despite Customer Shift to Multiple Cloud Vendors

Deepak Gupta February 7, 2022
Updated 2022/02/07 at 11:29 AM

Amazon has racked up four straight quarters of growth in cloud computing sales, a streak that analysts find impressive, and alleviating concerns that a customer shift to multiple cloud providers would hurt its leading market share.

Alerts from industry regulators about the need to mitigate risk, as well as some high-profile cloud outages, have increasingly led some enterprise technology teams to adopt an approach called multicloud. Diversification can also give you better pricing and backup options.

But Amazon’s strong cloud performance, much of its quarterly results that beat Thursday’s forecasts, underscores robust growth in much of the cloud sector, especially for the biggest players.

Overall spending on cloud infrastructure services increased by 37% to US$178 billion (approximately Rs. 13,29,510 crore) in 2021, surpassing the 34% growth in the previous year, according to estimates by Synergy Research Group.

The top three clouds, Amazon Web Services (AWS), Microsoft’s Azure and Google Cloud, also increased market share by one percentage point during the last three months of 2021 compared to the previous quarter at the expense of smaller vendors, the company said. research channel Canalys said on Thursday.

Canalys pegged its shares at 33% for AWS, 22% for Azure and 9% for Google.

“Multicloud is not about spreading your wealth across multiple clouds,” said Sid Nag, vice president at technology consulting firm Gartner. “There is still a primary cloud that you are doing most of your business with.”

Capital One, which said it was the first major US bank to completely abandon data centers to the cloud and struck an initial deal with AWS, is an example of this.

While it has adopted Google and Azure for some needs, it has expanded with AWS to become one of its biggest users, according to two people familiar with the matter. They declined to be identified due to confidentiality agreements.

AWS said that a multicloud approach creates headaches for customers. “AWS has proven its reliability,” it said in a statement.

Multicloud limitations

Clouds have become major growth drivers for big tech companies. AWS accounted for 13% of Amazon’s revenue last year and 74% of its operating income. The cloud accounted for 7.5% of Alphabet’s revenue. The Intelligent Cloud unit, of which Azure is a large part, generated 37% of Microsoft’s total sales.

Amazon attributed its growth in the cloud over the past year to expanding its sales force, adding data centers in new regions and customers moving more quickly to the cloud in the face of the pandemic.

Its cloud results were one of several factors that pushed Amazon shares up 17 percent in extended trading on Thursday. Other cloud companies gained from Amazon’s results highlighting the industry’s prospects. Hashicorp Inc and Datadog, companies aiming to make multicloud systems easier to manage, gained 5% and 4%, respectively.

The complexities of a multicloud approach may also be working in Amazon’s favor.

Wells Fargo announced last September that it would move to multicloud with Azure and Google.

“The risk of concentration is something that is discussed internally, discussed in the regulatory community as a concern,” Christopher Marsh-Bourdon, head of hybrid environments, told Reuters. “Putting all your eggs in one basket is not always the best approach.”

But he added that the bank is taking time to develop its expertise and will need at least five years before it maintains a significant presence in the cloud.

And some smaller or newer cloud companies prefer one vendor, said Sigal Zarmi, a board member at Hashicorp.

Some multicloud businesses were also relatively small.

Verint Systems Inc has agreed to use Google Cloud as part of an agreement to bring in Google as a customer, according to a video last year on Verint’s website. But Google Cloud is just one of several providers the enterprise software company uses.

“Certain regions and industry sectors have preferences for specific cloud options,” Verint Chief Product Officer Jaime Meritt told Reuters. “And we’ve found that a multicloud strategy is the best path forward for Verint and our customers.”

© Thomson Reuters 2022

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