As businesses around the world look for ways to cut costs, cloud expenditures aren’t likely to see much reduction. That’s according to Amazon, Microsoft, and Google, which have all claimed that customers are reprioritizing cloud spend rather than cutting back.
All three of the major cloud service providers mentioned this reprioritization, or optimization, in their most recent quarterly financial results. All three posted double digit increases in year-on-year revenue, however, the percentage growth has declined quite significantly for all three in the past three years since the burst from the coronavirus pandemic.
Optimization often means cutting back on resources or spend, but with the surge in interest around artificial intelligence, many companies are shifting spend from some cloud areas and pushing it straight back into various AI projects. The bulk of this AI experimentation will be conducted on cloud, meaning AWS, Azure, and Google Cloud continue to see revenues growth even with a change in prioritization.
“Customers are pretty explicitly telling us that this is not a cost-cutting effort where they spend less money on technology or on the cloud.” said Amazon CEO, Andy Jassy, in an earnings conference call. “This is companies reprioritizing what matters most to their business…and trying to reallocate resources so they can build new customer experiences.”
Artificial intelligence isn’t the only technology keeping these cloud providers afloat, and for some industries solutions for analytics, big data, and edge solutions will be the latest buzz. One of the key realizations from this recent downturn in the tech world is that the major cloud providers appear to be recession-proof, as so much business and operations run through the cloud.
For AWS, Azure, and Google Cloud, which control more than 70 percent of all cloud services, this means that even in a time when businesses are trying to cut costs, it is almost impossible to lose all revenue streams. This will only be exasperated with the onset of AI in every industry, as AI research and deployment is one of the most resource intensive sectors.
Small and medium sized businesses looking to adopt AI need to utilize cloud services, in order to offset the set up and operations cost. Even the largest AI companies, such as OpenAI, are only managing to operate ChatGPT and DALL-E with huge investment from Microsoft and access to Azure cloud services at lower costs.
With Microsoft and Google two key players in the AI market, it is going to be very difficult for a startup to compete with them in AI. Not only do they have more resources, but they control the resource allocation and, as Microsoft has shown, will be able to pick and choose the winners and provide them with funding and cheaper access in return for early use of their AI tools.