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Consumer-Centric Services Driving Cloud Growth

The move from on-premises data centre expenditure to service provider deployments is continuing this year, with the use of cloud infrastructure services accelerating, Canalys has found.

According to Canalys estimates, worldwide cloud infrastructure services expenditure reached US$8.2 billion in the 2016 first quarter, up 53 per cent year-on-year.

Total spend for the year is forecast to exceed US$38 billion, including infrastructure as a service and platform as a service delivered as part of hosted private and public cloud services.

canalys“Business adoption is increasing fast, but it is the growth of consumer-centric services, such as video streaming, content storage, gaming and social networking services, that has been the main driver,” Canalys research analyst Daniel Liu commented.

“Use will continue to grow as smartphone penetration increases, high-speed connectivity becomes pervasive, bandwidth restrictions ease and new content-driven apps emerge.

“The combination of cloud and mobile has enabled new business models and tech start-ups to emerge, giving instant access to billions of customers via online marketplaces. By 2020, the value of the cloud infrastructure services market is expected to reach US$190 billion.”

Canalys principal analyst Matthew Ball noted that with Amazon, Microsoft, Google and IBM SoftLayer pushing to offer data centre capacity to businesses, this “is also having a major impact on the IT industry”.

Ball noted that over 50 per cent of servers shipped to data centres this year will provide cloud infrastructure services, however that “these are typically low-margin and increasingly white box deals, which is affecting vendors and channel partners that sell compute and storage”.

“These data centres are scaling rapidly and operated by an increasingly consolidated number of providers,” Ball commented. “The top four providers accounted for nearly 60 per cent of the total market in Q1, up from just over 45 per cent two years ago, with Amazon leading the way with 30 per cent.

“This move is supported by virtually every software company prioritising the development of their offerings for the cloud.”

With massive capital investment required to sustain cloud data centres, many providers will leave the market, with consolidation to be rapid, Canalys states, noting that “a significant chunk of cloud use is driven by loss-making, venture-backed Silicon Valley start-ups” with a questionable-looking future as investors become more cautious.

Canalys additionally noted that “ongoing uncertainty as to whether data in the cloud can be kept hidden from the US and other government agencies will keep many enterprises wary of storing data in the public cloud”.

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