Data-center spending is half that of cloud services

Spending on cloud services reached a total of $178 billion in 2021, a 37% increase over the $130 billion spent in 2020 and twice the amount enterprises are spending on their data centers, according to Synergy Research Group. For the fourth quarter of 2021, total cloud spending was $50.5 billion.

When the COVID-19 pandemic hit in 2020, it drove a major shift in worldwide IT operational and spending to the cloud as company shifted to working from home. That trend is only continuing, even with the pandemic tapering off and companies calling people back into the office.

John Dinsdale, principal analyst with Synergy, said he expects the cloud market to continue to grow at the considerable pace. “There is absolutely no doubt that the cloud market will continue to grow rapidly. That is an environment in which leading cloud providers ought to be able to continue aggressively growing their revenues,” he said via email.

However, the market is far from settled. There is growth in some areas and decline in others. Amazon Web Services (AWS) remains the dominant force, with 33% market share. AWS has held steady at 33% give or take a percentage point or two, the last five years.

Dinsdale said that despite holding steady in terms of market share, AWS continues to grow. “The chart showed market shares and not revenues. Its market share might be holding steady at around 33%, but that is a steady share of a large market that is growing rapidly. AWS’s continued revenue growth is actually rather impressive,” he wrote.

Microsoft, on the other hand, has seen steady growth over the last five years. It has gone from approximately 13% in 2017 to 21% in 2021. Dinsdale attributes this to a strong corporate focus on the cloud from the top down at Microsoft, combined with a long-term program of continued heavy investment in its cloud and data center infrastructure.

“Microsoft also benefited from having existing enterprise relationships through its server and software products, in all regions and countries. So it’s a combination of focus, financial backing and a worldwide brand that plays well with enterprises,” he told me.

Google’s global market share stands at roughly 10% share of the cloud services market as of fourth quarter 2021, followed by China’s Alibaba at 6% market share.

The two categories shifting to the downside are “others” and IBM, which has gone from approximately 8% share in 2017 to 4% share in 2021.

But numbers can be deceiving. Dinsdale said IBM is still growing its cloud revenues, just at a growth rate that is far below Amazon, Microsoft, and Google. So IBM is not losing ground, per se, in the revenue department, it’s just not gaining ground as fast as the others.

The same holds true with companies in the “others” category. Those that have been steadily losing market share include Oracle, Salesforce, NTT, Fujitsu and Rackspace. Like IBM, all continue to grow revenues but not as quickly as the market leaders or the market overall, Dinsdale wrote.