The past 12 months have proven to be a testing time for the hyperscale cloud giants, with many of them reporting uncharacteristically downbeat financial results, bucking the trend of year-on-year double-digit growth rates.
Amazon Web Services (AWS) and Microsoft are among those affected by this trend over the course of 2023, which has been attributed to their enterprise customers seeking to reign in their outgoings and focus on optimising the cloud resources they do have rather than shell out for more.
While some have resorted to job cuts to counter their financial losses, others – such as Google Cloud – have responded by taking steps to optimise their own infrastructure in a bid to cut costs while also investing in initiatives so they can expand into new business verticals.
Looming large over all of this, though, has been the communication regulator’s review into the inner workings of the UK cloud market, which culminated in Amazon and Microsoft being accused of anti-competitive behaviour and a deeper investigation into their operations by the Competition and Markets Authority (CMA).
And, as 2023 has drawn to a close, the CMA investigation – in particular – looks set to cast a long shadow well into 2024 and beyond.
Here are Computer Weekly’s top 10 cloud stories of 2023.
The year kicked off with a prescient warning from datacentre resiliency think tank, The Uptime Institute that 2023 would see a slower pace of cloud migrations than in previous years, as enterprises look to save money in the face of troubling economic conditions. At the same time, it warned, some enterprises have found the promised cost savings and performance gains moving to the cloud was supposed to bring them have failed to materialise, prompting some to pause their migrations and rethink their approach.
And it did not take long for the Uptime Institute’s predictions to be proven right, as Amazon Web Services (AWS) moved to assure the market that it had a “healthy and robust” customer pipeline after its full-year results confirmed in February 2023 an ongoing slowdown in its annual growth rate.
The company attributed this to customers cutting back on their cloud spend, which was a trend Amazon’s financial chief predicted would persist into 2023 and would contribute to its cloud arm announcing job cuts the following month.
The AWS job cuts were coupled with a hiring freeze, and both were cited as a factor in why the cloud giant was seemingly falling behind its competitors on the sustainability front, in a series of exclusive articles on Computer Weekly.
Amazon denied claims made by sources that the departure of several high-profile executives within its sustainability team had slowed the company’s progress in helping its customers curb their carbon emissions.
However, in an article published several months later, Computer Weekly revealed how the company’s enterprise and public sector customers were struggling to get detailed data out of AWS pertaining to their Scope 3 emissions, which is increasingly becoming a regulatory reporting requirement and is something its competitors already offer their clients.
Seemingly every public cloud firm moved to nail their flag to the generative artificial intelligence mast in 2023, with Amazon, Microsoft, Google and others all declaring commitments to helping their clients make the most of this trend.
Details of use cases for the technology were frequently shared during conference season, and many of these same firms also shared details of the investments and efforts they were making to ensure they were well-placed to take advantage of this trend during their financial results.
The government found its efforts to level the playing field for UK-based cloud providers going head-to-head with the hyperscalers for public sector business weighed and found wanting on several fronts this year.
Participants in the government’s long-running, SME-focused G-Cloud procurement framework hit out at the decision to prolong the life of the 13th iteration of the purchasing agreement by a further 12 months, claiming the move is making it a commercially unviable way for small businesses to sell cloud services to the public sector.
Elsewhere, the government also found itself coming under fire from SMEs for failing to do enough to make its hyperscale-focused Cloud Compute framework more accessible to smaller suppliers, with many complaining about how high the barriers to entry are for it.
One measure the government had taken to make its hyperscale cloud-heavy Cloud Compute framework more accessible to smaller suppliers was by adding in a Lot that would give public sector buyers a choice between purchasing services directly from a hyperscaler or through one of their reseller partners.
The way the framework is structured means that cloud resellers must have express permission to sell the services of their chosen cloud provider through the Cloud Compute 2 purchasing agreement to participate, and – as it happens – Microsoft decided against allowing its resellers to do so.
The move left the company’s reseller partners reeling, as it meant many pure-play Microsoft reseller partners were unable to secure a place on the framework, and public sector buyers can now only purchase services directly from the software giant.
Communications regulator Ofcom completed its year-long investigation into the inner workings of the UK cloud market with a recommendation that the Competition and Markets Authority (CMA) take a closer look into some of the anti-competitive behaviours it claimed Microsoft and Amazon were dabbling in.
This is despite both parties pleading with Ofcom not to refer the market over for further scrutiny to the CMA in the months before, but their request was denied.
Shortly afterwards, the CMA shared details of the several areas its anti-trust probe into these suppliers would focus on – which includes whether the use of committed spend discounts is making the market anti-competitive.
While CMA investigation has only been going on since October 2023, the probe got off to a rocky start after a Computer Weekly investigation confirmed the Authority was one of 15 public sector entities to have benefited from preferential pricing on AWS products and services.
The disclosure gave rise to conflict of interest concerns, as public sector market watchers raised concerns over how the organisation is expected to investigate a supplier that it has a preferential pricing agreement with.
The hold that Microsoft and AWS have on the hearts, minds and budgets of IT buyers has come in for increased scrutiny throughout 2023, but – in the meantime – fellow public cloud giant Google has turned its attention to trying ramp up its market share of this market too.
The company outlined its plans in October 2023 to do more to court public sector IT buyers through the setting up of business division specifically devoted to meeting their IT wants and requirements.
Another public sector entity that emerged as a confirmed beneficiary of Amazon’s preferential pricing deals was the Home Office, who is already confirmed as being one of the public cloud giant’s biggest public sector clients.
In early December 2023, the government published details of a new deal between the Home Office and AWS that is quadruple the value of the previous contract the two entities had in place, with the contract raising eyebrows among public sector market watchers, who raised questions about how the procurement was conducted and the contents of the contract itself.