Cloud services in the past were sometimes criticised for being nothing more than a IT delivery method. Things have changed dramatically in 2020, when delivery methods have become very important for so many other things. Cloud services are certainly more important during a pandemic, but we saw no exemptional overall growth in Q1 2020; however by the end of the year I expect it to be one of only a few ITC areas which will have grown as other areas fall foul of the deep recession many countries are entering. Spending on cloud services of all kinds grew by 19% in Q1 to $66.1b and by 18% to $266b in the year to the end of March. SaaS growth was 11% in the quarter to $29.2b and 8% in the year to $124b in which it represented 11% of the total spending on software overall. IaaS and PaaS spending grew by 27% and 28% in the quarter to $23.0b an $13.9b respectively – and by 29% and 27% in the year to $85.4b and $50.8b. My Figure above shows the annual growth of the three cloud service types with a forecast for 2020.
Spending on SaaS was larger than IaaS and PaaS – see my Figure above for the total for the year to the end of March, which also gives market shares for revenues of leading suppliers of the $136b market for IaaS and PaaS. These have all played a role in handling the changing needs of customers and communities during the crisis. In particular:
- Amazon has addressed employees, partners, customers and communities as part of its response to the pandemic. It’s AWS business grew by 33% in Q1 2020 (which is not abnormal), topping $10b for the first time ever. It has hired 175,000 full- and part-time employees. Most of its charitable spending has been in the US, including donating laptops to schools.
- IBM’s approach to the crisis has been to protect employee health and safety – helping them to sustain large government and company digital processes. It’s Weather Channel data is being used for tracking the development of the virus, while its supercomputer expertise has been helping with the urgent search for treatments and the development of an anti-virus. It’s cloud revenues including SaaS) grew by 16% in Q1 2020 to $6.6b.
- Google cloud revenues grew (not unusually) by 61% to $2.8b in Q1 2020. Usage of its Meet video conferencing platform during the pandemic was 25 times higher than it was in January. Other relevant products include G Suite and G Suite for Education, which has been used by many customers to support much larger numbers of those working from home. Its Classroom app has been helpful in allowing schooling to be delivered to students at home.
- Alibaba’s cloud revenues grew by 53%to $1.8b. Its DingTalk product has been helping deliver streamed lessons to 120m Chinese students at home. It has also been used by healthcare workers to diagnose infection via CT scans. It has been supporting researchers with High Performance Computing for drug design.
This demonstrates that cloud suppliers often have considerable computing resources and platforms beyond just delivery.
It’s difficult to forecast the negative effect of the pandemic on ITC spending, which I currently expect to fall by 7% in 2020 overall; nevertheless cloud computing is certain to grow in importance over related sectors of the market. In my Figure above I show my forecast for IaaS and PaaS cloud computing combined, outsourcing, managed services, infrastructure services and enterprise (server, storage system and networks) between 2006 and 2020. I expect an acceleration of cloud computing spending as a result of the crisis akin to that of smart phones and devices during and after the Credit Crunch in 2008-9.