Clouded house

A year is a long time in the cloud market. What’s happened, and what does 2024 hold?
Matthew Burbidge
By Matthew Burbidge
Johannesburg, 13 Dec 2023
Clouded house
Clouded house

As one would expect, it’s been yet another stellar year for the cloud model, and this spending is set to continue, by one measure, at over 20%, to $678 billion in 2024. This resilience shows the cloud has become an indispensible part of doing business, but, as Gartner points out, companies are now remaking the cloud in their own image.

“The tables are turning for cloud providers as cloud models no longer drive business outcomes, but, rather, business outcomes shape cloud models,” says Sid Nag, VP analyst.

The world is also a very different place from a year ago, with global economic growth set to slow in 2024 to 2.6% from 2.9%, according to a Reuters poll. Higher interest rates are on the cards, as are higher energy prices, and there is a cooling of the economies of China and the US. Then there are the wars in the Middle East and Ukraine, from which no good will come.

The tables are turning for cloud providers as cloud models no longer drive business outcomes, but, rather, business outcomes shape cloud models.

Sid Nag, VP analyst

The big three hyperscalers have recently posted Q3 results, and all are registering a gradual slowdown. This is mainly because customers are trying to rein in costs, and all three say they’re doing everything they can to help “optimise” cloud spend; they also make mention of optimisation multiple times during their earning calls. In practice, this will take the form of persuading customers to sign on for a multiyear saving plan.

Betting on GenAI

Other than the slowdown, the results are very different, and show how different the companies are. Microsoft held steady at 24% growth from the previous year, and said its cloud revenue was $31.8 billion, up from $25.7 billion. Google said it had grown 22%, a slowdown from 37% the year before, and its revenue grew to $8.4 billion from $6.9 billion. AWS was at 12% growth, with revenues of $23.1 billion. Last year, it reported 27% and $20.5 billion earnings.

The big story, of course, is the rise of generative AI, and it’s clear that hyperscalers are looking to this to fuel growth. On his earnings call, Amazon CEO Andy Jassy pointed out, as he is fond of doing, that there’s still so much potential cloud growth, given that over 90% of global IT spend is still going on-premises. He believes this equation is going to flip to the cloud, with the advent of large language models and GenAI being one compelling reason.

Cloud will be an obvious choice for those businesses looking to deploy some kind of GenAI. But, says Gartner’s Nag, these businesses will also want their cloud partners to look at non-technical issues such as cost, sovereignty, privacy and sustainability. Providers that deliver these services should see new revenue streams as GenAI grows, he predicts. Dell, meanwhile, has thrown its lot in with Meta, and thinks there’s a case to be made for customers to use the Llama 2 model on-premises. Dell believes there’s a market here, and wants to be the company to fulfil this need, and will presumably sell you a big server to do all of this crunching. It has partnered with Nvidia, which will bring pre-built tools to the market. It makes much of the fact that a company’s proprietary data will be more secure, given that it’s being used on-premises.

Cloud migration will need to be properly planned as it’s not a drag-and-drop exercise.

Clinton Jacobs, BMIT

Gartner sees growth in all segments of the cloud market next year. Infrastructure- as-a-Service is forecast to experience the highest end-user spending growth in 2024 at 26.6%, followed by Platform-as-a-Service (PaaS) at 21.5%.

Another thing Gartner thinks will drive spend is the increased use of industry cloud platforms. Now, just 15% of businesses are using this kind of cloud, but it prophesies that this will rise to 70% by 2027. These clouds will be customised for specific industries and will include things like a library of pre-packaged business capabilities.

Locally, the cloud market is seeing growth of 38%, says BMIT, which reported numbers for 2022. This is expected to be sustained until 2027 at a compound annual growth rate of 27%, reaching a shade under R80 billion.

Clinton Jacobs, the writer of the report and a senior analyst at BMIT, says cloud migration will need to be properly planned as it’s not a drag-and-drop exercise. He says businesses report that they’re finding it challenging to migrate legacy apps to the cloud.

Sovereignty concerns

He says local SaaS saw growth in the mid-30s, and PaaS and IaaS were growing by around 25%. The most significant event locally was probably the entrance of Alibaba’s cloud into the market. It’s partnering with BCX, and should pick up some business because it will be priced in rands. It’s called Africa Local Cloud and will initially have two zones in Johannesburg, with a third zone in the Cape following next year. It’s also going to making a play for the rest of the continent, starting in Mozambique.

Google Cloud’s local datacentre will go live in the first half next year, country manager Niral Patel told me late in November. It also signed an MOU with Liquid Intelligent Technologies, which, it’s thought, will improve the latter’s cloud and cyber offerings.

Source; Gartner
Source; Gartner

What else will come to pass in the global market? Forrester says it expects to see some movement on the FinOps Open Cost & Usage Specifications (Focus) project, run by the FinOps Foundation, which, in theory, will standardise the billing construct and presentation of cloud cost data. Microsoft and Google are on board, but AWS is not yet part of the FinOps Foundation, something it predicts will change in the new year.

Forrester predicts that Oracle will see strong growth, particularly as it brings it compute power to run and train GenAI. Forrester says it’s betting that at least 10 major accounts will redirect significant spend to the company, bringing at least $100 million in annual cloud spend each. As for customers shaping cloud models, it says it expects to see the hyperscalers bring 30 new regions online by the end of 2024 in anticipation of sovereignty concerns. 


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