Cloud giants manage expectations as customers optimise

Cloud giants manage expectations as customers optimise

Cloud giants manage expectations as customers optimise

Global cloud provider OVH recently joined AWS in warning of slowing growth, as the market readjusts after the boom of the pandemic years. The news chimes with the latest CONTEXT figures for cloud services sales through distribution, which show year-on-year (YoY) revenue growth in Q1 much lower than the highs of 2021/22.

Slowing but still growing

OVH revised down its annual turnover predictions from 14-16% to 13-14%, citing "recent developments in demand which in the short term reflect a delay in certain migration projects to the cloud." It follows comments by AWS CFO Brian Olsavsky last week that customer optimisation efforts will be "a headwind to AWS growth" in the short term. 

The news marries somewhat with new CONTEXT data showing YoY cloud services revenue growth for some of the world's top markets in Q1 2023 at 14%. That's significantly lower than a recent high of 38% in Q4 2021 and slightly lower than the figure for software and licenses (17%), which trailed cloud services by a wide margin for much of 2021/22. Our Q1 2023 figure for infrastructure-as-a-service (IaaS) revenue growth stood at 13% after several quarters of decline.


Peering through the clouds

To understand why, it pays to look at recent research from SoftwareOne which reveals that 83% of CIOs believe they will be asked to do more with less this year. This news should not necessarily be viewed through a negative lens. In fact, we're now seeing revenue growth settle down after the highs of the pandemic when reactive investments led to regular double-digit percentages. Those investments also often accrued technical debt for customer organisations as applications were rushed into production. 

Going forward, as organisations pay off this technical debt and deal with issues stemming from lift and shift approaches and over-provisioning, sales through distribution are likely to bounce back.

Read the latest CONTEXT research update on cloud computing here.

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