China cloud services market Q3 2020
Shanghai (China), Bengaluru (India), Singapore, Reading (UK) and Portland (US) – Thursday, 26 November 2020
Cloud infrastructure services spend in China grew 65% in Q3 2020 to exceed US$5 billion for the first time. Total expenditure was over US$750 million higher than in the last quarter and nearly US$2 billion more than in Q3 2019 according to the latest Canalys data. In dollar terms, Q3 saw the largest quarterly expansion ever recorded, as consumption of cloud services remained robust. Demand was boosted by a renewed focus on digital transformation following the COVID-19 pandemic, restarting of delayed projects and the quick economic recovery after the end of lockdown earlier in the year. China remained the world’s second largest market, accounting for 14% of global investment. The top four vendors collectively accounted for 80% of total spend in Q3 2020. Alibaba Cloud remained the leader with a 41% share and continued strong growth. Huawei Cloud and Tencent Cloud both saw healthy growth, each taking a 16% share. Baidu AI Cloud was the fourth largest cloud service provider, accounting for 7% of total spend in the country.
“Demand for cloud-based services reached new heights in China, as organizations reprioritized IT spending and accelerated digital transformation projects,” said Canalys Chief Analyst Matthew Ball. “Remote learning and working, as well as gaming, streaming, ecommerce and other online services continued to drive consumption of cloud infrastructure resources. This, combined with the digitalization of processes and operations within enterprises and government organizations, will maintain demand. Organizations have overcome challenges caused by the COVID-19 pandemic by using digital services developed by cloud service providers. For example, online ordering and delivery services have expanded into many industries, such as retail and restaurants, while data management tools have become pivotal to operations in healthcare and banking.”
The Chinese cloud service providers have benefited from reacting quickly to the pandemic and subsequent lockdown at the start of the year. But some deals were delayed or cancelled, while contracts were restructured, especially in hard-hit sectors such as hospitality and transportation. Cloud service providers are now adjusting their offerings to the needs of specific industries, which will maintain growth. Alibaba Cloud reported strong growth in finance and retail, while its existing customer base continued to grow. Huawei Cloud has seen rapid growth in the finance, industrial manufacturing, Internet and government sectors. Tencent Cloud saw rising demand for its PaaS solution. Baidu AI Cloud was boosted by growth in the transportation, healthcare and financial sectors.
“Customer requirements are increasing, while the pace of innovation is accelerating in China. This makes the ongoing development of capacity and connectivity, as well as data services, including management and artificial intelligence, critical within a vertical-led model,” said Canalys Research Analyst Blake Murray. “Building successful relationships with customers while economic stability is returning will pay off in larger and more focused digital transformation projects in the future. This will also lead to a combination of hybrid-cloud and cloud-native deployments, where value must be demonstrated to drive additional opportunities. As cloud infrastructure spend continues to grow rapidly in the coming year, provider competition will be decided by the health of customer and partner relationships.”
Canalys defines cloud infrastructure services as services that provide infrastructure as a service and platform as a service, either on dedicated hosted private infrastructure or shared infrastructure. This excludes software as a service expenditure directly, but includes revenue generated from the infrastructure services being consumed to host and operate them.
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