AI fuelling cloud infrastructure services growth

Channel players specialising in cloud infrastructure services should have seen 2023 ending strongly and are set for a solid period of growth as artificial intelligence (AI) starts to influence customer spending.

Figures from channel analyst Canalys indicated that the worldwide spending on cloud infrastructure services increased by 19% year on year (YoY) in Q4 2023. For the full year, the market was up by 18% to $290.4bn.

Canalys pointed to cloud migration picking up as well as fresh demand caused by the growth in AI applications. As a result, Canalys is forecasting that global cloud infrastructure services spending will increase by 20% in 2024, up slightly from last year. 

AWS, Microsoft Azure and Gioogle Cloud are driving a lot of activity, accounting for two-thirds of total spending. Those embracing AI appear to be growing the fastest, with Microsoft putting more pressure on its great rival AWS over the course of the most recent Q4. Microsoft also benefits from having a significant channel, with Azure available across a wide range of partners.

“AWS has been slower than its key competitors to make AI advances, which may explain why its growth is not accelerating as rapidly as that of Azure and GCP,” said Yi Zhang, analyst at Canalys.

“The integration of generative AI [GenAI] into mainstream software products is accelerating, potentially leading to quicker commercialisation of generative AI applications. Google,” she added.

The channel has already been alerted to the impact AI is having across various parts of customers businesses, with a growing opportunity for those that can grasp the potential of the technology in the cloud space.

“This trend underscores the growing importance of AI in enhancing user experiences, productivity and efficiency within software ecosystems,” said Alex Smith, vice-president at Canalys. “As AI continues to evolve, solution providers are exploring integration opportunities beyond vendor offerings, aiming to leverage AI capabilities to innovate and deliver enhanced solutions to their clients.”

The noise around GenAI dominated most discussions last year and the influence on cloud infrastructure services is another element of that conversation.

But the channel has to ensure it understands the technology and what objectives customers are trying to meet. Tristan Shortland, chief innovation officer of Infinity Group, said that partners needed to cultivate certain skills and ask the right questions.

“Channel professionals need to understand how and where GenAI can deliver value. In this respect, it is no different to any other tool, platform, service or product, in that the most important factor is possessing deep knowledge of the customer’s industry, IT infrastructure, security posture, workflows and wider challenges,” he said.

“The real art for channel professional is tying GenAI tools to specific and tangible use cases that will deliver value. You don’t need to have a deep technical understanding of the technology, just a well-informed understanding of how and where the technology can and should be harnessed within the customer organisation. Asking questions that will help to identify the potential applications of GenAI is a key skill for channel professionals,” he added.