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 public infrastructure. This excludes software-as-a-service expenditure directly, but includes revenue generated from the infrastructure services consumed to host and operate them.
The researcher says in 2023, China’s cloud service market grew by 16% overall, up from 10% in 2022. Canalys expects growth to accelerate further in 2024, with Chinese cloud infrastructure services spending set to increase by 18%.
Generative AI spending will drive cloud spending even as enterprises mature past IT optimisation. Canalys says the significant price cuts implemented by Chinese cloud service providers have helped drive adoption by more cost-conscious customers, exacerbating the competitiveness within the market. To differentiate themselves amid the escalating price battles, cloud vendors will emphasize elevating service standards, fostering innovation and refining the overall cloud service ecosystem.
The top three cloud vendors – Alibaba Cloud, Huawei Cloud and Tencent Cloud, collectively grew their business by 28% and secure 74% of the total market. All three are placing greater emphasis on developing their partner ecosystems to fuel growth. Cloud revenue generated through the channel accounted for 25% of total revenue in the Chinese market in Q4 2023, and this proportion is expected to increase.
“Cloud vendors are currently faced with the dual challenges of maintaining revenue growth and sustaining profitability amid competitive pressures driving price reductions,” said Yi Zhang, an analyst at Canalys.
Zhang says outside of profitability concerns, cloud providers must also ramp up investments in emerging technologies. In such cases, effective collaboration with partners can help mitigate risks and gain access to partners’ expertise and resources. “This will allow them to navigate competitive pressures and foster sustainable growth in the AI-powered future,” she adds.
