Cloud providers have to adjust to slower growth rates as customers become more cost savvy.
Cost-conscious customers and general economic pressure are combining to stymie the growth of the cloud computing market, according to a report in the Financial Times (FT).
Microsoft’s Azure cloud platform revenues grew 42 percent in the latest quarter, the FT said, which is a point below expectations. Meanwhile, Amazon Web Services sales rose only 27 percent, marking company’s slowest quarterly cloud computing growth rate since Amazon started tracking that revenue as a separate business.
Big tech fails to pass on savings
Companies are facing sharply rising bills as they move more of their computing into the cloud, the FT said. In turn, this has triggered downward pressure on growth, the newspaper added.
The FT cited the chief technology officer of a major bank who complained that the biggest cloud companies had not moved fast enough to reduce fixed charges for aspects such as storage and computing. This, he said, should have happened as the volume of business soared and cloud providers were able to leverage greater efficiencies that come from operating at greater scale.
The fact that big tech firms have been reluctant to pass along such savings to their customers has forced cloud providers to look elsewhere to grow their businesses. For example, some cloud companies are making it financially preferable for customers who make long-term commitments.
“Customers who lean in with AWS on larger, longer-term commitments tend to enjoy the best economics”, Elizabeth Baker, vice-president of AWS global deal strategy and programs, told the FT. Corey Quinn of The Duckbill Group, a consultancy that helps companies reduce their cloud spend, also noted the new strategy. “They want you committed to spending a large amount of money and growing on their platform, and not considering other cloud providers.”