I’m sure you’ve seen impressive statistics about the growth in cloud spending. Analysts are predicting a huge year-over-year increase exceeding 20% for global public cloud services in 2023.
But there are some challenges on the horizon that have the Big 3 trio of cloud hyperscalers—AWS, Azure, and Google Cloud—rethinking their strategy so they can hold onto and grow their market share.
First, businesses are becoming more cost-conscious and are looking for ways to optimize cloud spending. Enterprises, such as Dropbox and 37signals, have tried to accomplish this through repatriating their cloud estate. While this offers some benefits, the public cloud will remain the top pick for most organizations.
Second, the Big 3 face growing competition from organizations like Alibaba Cloud and Oracle, which has also made great strides to include compelling AI offerings. For all three, according to Gartner, the biggest growth area for 2024 will be in IaaS, which they predict will grow by 26.6%. Indeed, in Q1 2024, global cloud infrastructure service spending grew $13.5 billion over the first quarter of 2023, bringing total spending to over $76 billion for the quarter.
Of the Big 3, AWS still leads the pack, but it’s down slightly—from 32% of market share in 2023 to 31% of market share now. Azure, on the other hand, has reached an all-time high of 25% while Google is at 11%.
In this post, we’ll explore three trends that underscore efforts by the Big 3 to hold on to and increase their market share for 2024.
Trend #1: Industry Cloud Platforms (ICP)
One of this year’s top trends is the growth in all-in-one platforms tailored to specific verticals—what Gartner refers to as “industry cloud platforms” (ICPs).
ICPs began with smaller vendors serving niche markets with end-to-end platforms, typically including data models, a library of packaged and customizable business capabilities, API and security tools, and more. These include companies like Veeva for the life sciences industry, CloudMedx for healthcare, and Siemens Insights Hub for manufacturing.
Seeing the demand for these types of end-to-end solutions, the Big 3 cloud providers have started crossing over into the ICP space—in some cases competing with their customers to offer industry-tailored solutions, providing out-of-the-box functionality to capture lucrative verticals, such as:
- Azure Health Data Services: Supporting patient care, improving clinical workflows, and consolidating diverse data streams, while safeguarding protected health information (PHI).
- AWS Cloud Solutions for Financial Services: From data platforms and analytics to regulatory compliance and AI-based fraud prevention.
- Google Cloud Manufacturing: Optimizing the supply chain, supporting end-to-end customer journeys, and incorporating AI, such as through predictive production-line maintenance.
While the focus of ICPs on specific industries has many benefits to customers—better time to value, simplified regulatory compliance, and pre-built workflows—there are a few drawbacks.
Leading these is concern about vendor lock-in. Data gravity—the accumulation of dependencies on a particular vendor’s offerings—can lead to an organization spending far too much money indefinitely without an exit strategy. To avoid the risk of lock-in, some organizations are consciously adopting a heterogenous cloud strategy to build in flexibility and potential innovation.
Additionally, many of these solutions are not priced flexibly or transparently, meaning that while the barriers to entry may be low, businesses may find it hard to keep cloud costs in check, especially if their needs scale up unexpectedly.
Finally, not every ICP is equally mature. Some ICP offerings may be more developed and integrated within a specific vertical than others. Providers looking to cash in on a “juicy” vertical may disguise a meager offering with exciting use cases promising functionality and simplicity.
Trend #2: All-in-One AI to Rescue Cloud Providers
Every conference I went to last year (Read on to find out about some more that I’m heading to this year.) was intensely focused on AI—including specifically generative AI—in industries like healthcare, manufacturing, and financial services. This trend is nothing new, of course.
But when I saw Gartner’s report on the IaaS boom—the fact that this is the biggest growth area in cloud—I realized the connection between these two trends.
The very specific infrastructure needs of AI, which include high computational demands of AI models (processing power, storage, networking) compared to standard cloud tasks, are creating increased demand for IaaS.
Tools like Azure Machine Learning and AWS SageMaker were the first to start simplifying these intensive needs by offering pre-configured environments for building, training, and deploying machine learning models. By abstracting away the complexities of managing underlying infrastructure, they let developers focus on the specific needs of their AI project.
Those tools have ultimately paved the way for one of this year’s biggest trends: AIaaS solutions.
AIaaS provides easy-to-setup minimal configuration and maintenance infrastructure along with AI services, simplifying infrastructure configuration so that organizations can focus on the upper layers of an AI application stack.
Of course, any discussion of AI must include generative AI.
On that front, Amazon reported in May 2024 that its relatively new CEO Adam Selipsky would be stepping down. Several outlets and internal sources have speculated that the main reasons for this were that Selipsky hadn’t pushed GenAI enough, the delayed Bedrock release, and no substantial M&A had taken place—unlike AWS rival Microsoft.
AWS has come relatively late to the AI game, after Microsoft’s early lead with its wise investment in ChatGPT—a stake that’s now up to $13B—and Google developing its own ChatGPT, Gemini (previously Bard) model. In April 2024, AWS announced the release of its AI assistant Amazon Q Business, though it seems immature and lags behind the competition.
Additionally, as organizations embrace AI, they’re increasingly aware of concerns around governance, economics, sovereignty, privacy and sustainability. To support these needs, hyperscalers must embrace initiatives that support AI trust, risk and security management (TRiSM) for all AI team members.
A term coined by Gartner, AI TRiSM helps organizations build trust in their AI systems by ensuring they are fair, secure, and ethical. TRiSM provides a framework to manage risks throughout the AI lifecycle, from design and development to deployment. For example, AI TRiSM can help identify and prevent bias in model training data, or put security measures like MFA in place to protect sensitive information.
Trend #3: Sustainability and Transparency
Before you roll your eyes (like me, you’ve probably heard it before), 2024 is shaping up to be the year where we make actual strides toward sustainability.
Environmental concerns have been with us for years. As much as we love cloud, it’s catastrophically wasteful, with a single data center sucking up the equivalent electricity per year of 50,000 homes—more energy than some nation-states. Up to 40% of that electricity goes towards cooling alone.
But a few things are happening right now that could start reversing those numbers. For one thing, new regulation in the EU will make reporting energy and water use in data centers mandatory starting in September 2024. With the numbers out in the open, businesses will have more choice when it comes to choosing vendors who prioritize sustainability. In fact, AWS has come out with a Customer Carbon Footprint calculator that helps their customers do just that.
Another major environmental factor this year is poised to be serverless—one of the top 5 cloud computing trends for 2024, according to the CNCF. Beyond eliminating the hassle of infrastructure management, serverless apps optimize almost by definition, sharing resources on an as-needed basis, eliminating the risk of over-provisioning, while its pay-per-use design strongly incentivizes architectural and coding efficiency.
Ultimately, serverless will let customers hand off environmental responsibility to cloud providers, who will be increasingly incentivized to improve energy consumption by regulations like in the EU.
As your cloud provider becomes greener and more sustainable, so do you.
While this approach is promising, the Big 3 hyperscalers are still not as transparent as they could be, leading to higher-than-necessary financial and environmental costs, especially around AI in the cloud.
If they play their cards right, this could emerge as yet another competitive differentiator for the Big 3 at a time when corporate environmental, social, and governance initiatives (ESG)—long dismissed as a fad—have become “deeply embedded in the financial foundations of companies.”
Keeping an Eye on the Big 3 and Beyond
Ultimately, while cloud will continue to grow, none of the Big 3 cloud providers can afford to rest on their laurels. They’ll probably need to boost their offerings in all of these trending areas to keep themselves afloat, given the competitive and saturated market conditions.
Where cloud providers once tried to be all things to all people, now even the hyperscalers are realizing they can make more money being specific things to specific businesses, such as competing with smaller vendors for business within a specific vertical rather than just selling bare-bones storage or compute in bulk.
What I hope for the coming year is that we’ll start seeing greater transparency from the Big 3—from energy use to pricing to governance. This will give us all more accountability from our cloud providers while also giving us more control over how we use cloud.
I’ll definitely be watching for all of this as I make my way to some of these essential industry events this year.:
Other places you can catch me and other members of the IOD team:
- AWS Summit New York, July 10, 2024: Peek into the future of business with sessions on cutting-edge cloud technologies like generative AI and IaaS.
- Black Hat USA, Las Vegas, August 3-8, 2024: This conference offers in-depth training, live hacking demos, and insights from industry experts for professionals who need to stay ahead of and defend against evolving cloud threats.
- AWS re:Invent 2024, Las Vegas, December 2-6, 2024: This one’s basically every cloud lover’s annual pilgrimage, where you can discover all in one (vast!) location cutting-edge and emerging products and services, catch earth-shaking keynotes, and basically witness the future of cloud technology unfolding before your eyes.
Getting out to as many events as possible across the globe helps our team stay on top of changes and trends across the industry, not just from the Big 3 but from some of the most exciting startups and midsized vendors
At IOD, we serve tech leaders working in this ecosystem like Microsoft, Check Point, Wiz, and Zoho, so we all take the responsibility of monitoring industry changes seriously. It’s not just about scanning the headlines, it’s about a deep-down understanding of how things are changing and why.
That’s why IOD content is written by experts with practical, hands-on experience in cloud, cybersecurity, AI, DevOps, and data engineering.
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