Cloud environments beyond the Big Three

The Big Three cloud providers, AWS, Microsoft, and Google, are going like gangbusters. The most likely reason is two letters: AI. The first quarter of 2024 saw the strongest growth since the third quarter of 2022. Enterprise spending on cloud infrastructure services topped $76 billion during Q1 2024, up by $13.5 billion (a 21% increase) compared with Q1 of 2023.

The Big Three cloud providers now account for 67% of global cloud spending. Amazon still retains its lead at 31%, but its share is shrinking compared with Microsoft (25%) and Google (11%), which showed stronger year-on-year growth, according to Synergy Research Group.

The ever-changing tech landscape

If you don’t like the current state of tech, wait a year. While AWS, Microsoft Azure, and Google Cloud control most of the global cloud spending, an interesting dynamic is playing out beneath these headline figures. Enterprises are increasingly investing in second-tier cloud providers such as Huawei, Snowflake, MongoDB, and Oracle, which collectively demonstrated the strongest year-on-year growth rates.

Also, there are the new “microclouds” (my term), which are small upstart cloud providers, mostly offering very specific services, such as GPUs and TPUs in support of the exploding AI market. Nobody knows who these players are yet. They are private versus public companies, so investors are not watching them as closely (other than venture capitalist firms.)

The interest in cloud services besides AWS, Microsoft, or Google reflects a growing appetite among businesses for more specialized, tailored cloud services. These perhaps offer different advantages in pricing, performance, or data regulation compliance compared to their gargantuan counterparts. Price is the primary reason that I counsel some enterprises to take a harder look at the second-tier and microcloud players. These less convenient public cloud providers often offer large discounts. The major public cloud providers charge high prices for pretty much the same processors, storage, and networking.

Also, don’t forget about managed service providers, which are often better options than public cloud providers. They offer more full-service-type solutions that include public clouds as well as more traditional systems.

Other architectural models

The resurgence and innovation in edge computing and on-premises technology further support the trend toward diversification as data generation and consumption locations continue to spread geographically.

With these problem domains, which have become more numerous since COVID-19 when everyone scattered, limitations of centralized cloud data centers become more pronounced. Edge computing addresses these limitations by processing data closer to where it is generated. This drastically reduces latency and enhances the user experience in applications such as IoT, retail tech, and smart manufacturing.

Although many consider edge computing to be small devices, it also includes entire data centers and smaller server installations that exist to serve a specific business location. Many enterprises don’t see the wisdom of sending their data on a 2,000-mile round trip to the point of presence for a public cloud provider, which happens more often than we understand.

Additionally, although the cloud offers good scalability and flexibility, concerns over data sovereignty and security continue to push certain industries towards on-premises solutions. Sensitive data and critical applications in sectors such as finance, government, and healthcare often necessitate keeping data in-house under strict regulatory frameworks.

However, the real reasons are more pragmatic. The cloud is often more expensive than more traditional solutions, such as on-premises. Cloud is clearly more convenient for things like AI building and deployment, considering that you get a complete ecosystem on-demand, but the cost is beginning to drive many enterprises to consider placing some of their applications and data sets elsewhere.

Of course, multicloud and hybrid cloud options still exist and are growing strategies. By using multiple cloud services from different providers, businesses can leverage the specific strengths of each to find more value. Hybrid models combining both cloud and on-premises infrastructures allow businesses to optimize their IT environment based on cost and performance, with many more workloads returning to more traditional data centers (repatriation) due to unexpected costs.

The move to decentralized infrastructure

Were it not for the noise and hype around AI and all its immediate effects, the decentralization of infrastructure would be a more prominent topic of discussion. That’s what happens when you’re sifting through $20 billion of marketing buzz. However, I think it’s slowly and surely happening, and will continue for at least the next five years.

This evolution marks a shift in the digital infrastructure landscape. Enterprises are demanding more flexibility and control over their data and computing needs. Most of all, they are not happy with the amount of cash they keep pouring into the pockets of the large cloud providers. As a response, the market is adapting, providing a broader array of options beyond the Big Three. An eclectic array of technologies is able to provide more business value—that is, if you can get enterprises to look.