Australia’s IaaS market surges 37.1% in 2022

The Australian infrastructure-as-a-service (IaaS) market grew 37.1% in 2022 to total A$2.68bn, up from $1.96bn in 2021, according to Gartner, suggesting that there is still room for growth in the mature market.

Amazon Web Services (AWS) retained its pole position in Australia, with a 31.9% market share, followed by Microsoft (29.8%), Google (19.7%), IBM (4.5%) and Alibaba (3.1%).

“IaaS remains the engine of growth in the Australian IT market, showing no signs of slowing down. Alongside modernisation, it forms the two pillars of ongoing digital transformation,” said Michael Warrilow, vice-president analyst at Gartner.

“However, increased cloud spending is driving greater scrutiny from the business. CIOs will need to invest in FinOps to ensure they don’t blow the budget,” he added.

By comparison, the global IaaS market grew 29.7% in 2022 to total $120.3bn, up from $92.8bn in 2021. AWS maintained its global lead in 2022, followed by Microsoft, Alibaba Cloud, Google Cloud and Huawei. The top five IaaS providers accounted for over 80% of the market.

Sid Nag, vice-president analyst at Gartner, said IaaS growth in 2022 was stronger than expected, despite a slight softening in the fourth quarter as organisations focused on using their previously committed capacity to its fullest potential.

“This is expected to continue until mid-2023 and is a natural outcome of the market’s maturity. We expect an acceleration in 2024, as there is still room for plenty of additional future growth,” he added.

Indeed, all the major US hyperscalers grew their market share in 2022. AWS’s market share grew from 38.1% in 2021 to 40% in 2023, while Microsoft’s market share grew from 20.6% to 21.5%, reaching over $25bn in IaaS public cloud revenue in 2022.

Gartner noted that Microsoft’s software-first strategy continued to support its IaaS growth as organisations required more cloud capacity to support automation, advanced analytics and digital workplace capabilities.

Google saw the highest growth rate of the top five IaaS vendors, growing 41% in 2022 to reach over $9bn in revenue. Google’s increased investment in sovereign cloud and expanded sales and marketing partner programs helped to broaden its customer base and drive additional IaaS revenue.

Alibaba Group held on to its third position with a 7.7% market share, although with modest 2.4% year over year growth. While Alibaba continued to lead the IaaS market in China, its limited potential for expansion across global markets has slowed growth, driving its recent decision to spin off its Alibaba Cloud business into a separate entity.

Huawei rounded out the top five IaaS vendors with 4.4% market share and $5.2bn in revenue for 2022. Since its 2020 pivot to an increased focus on cloud, Huawei has been steadily growing its IaaS revenue in China and emerging markets.

Nag noted that generative AI will continue to drive the cloud market forward, particularly as hyperscalers look to support offerings beyond the existing, democratised generative AI solutions.

“As enterprises integrate generative AI into their technology portfolio, new markets and opportunities for cloud hyperscalers will emerge related to sovereignty, ethics, privacy and sustainability,” he said.