Cloud computing spending is growing again and there’s more to come

Businesses around the world spent $21.1 billion on cloud infrastructure services in the fourth quarter (Q4) of 2021, signaling a rebound in spending on cloud storage and compute power. 

Spending on cloud infrastructure was up 13.5% in the quarter year on year to $21.1 billion, according to tech research firm, IDC. 

The previous quarter saw spending on cloud infrastructure reach $18.6 billion after a remarkable year-on-year decline of 1.9% in Q2 2021, which was the first time in seven quarters that spending on cloud decreased.

Cloud spending rose as businesses and governments across the world embarked on major digital transformation projects over the last two years. The big winners are the big three cloud players: Amazon Web Services (AWS), Google Cloud, and Microsoft with Azure and its other cloud services, like Office 365.  

“This marked the second consecutive quarter of year-over-year growth as supply chain constraints have depleted vendor inventories over the past several quarters. As backlogs continue to grow, pent-up demand bodes well for future growth as long as the economy stays healthy, and supply catches up to demand,” IDC said of Q4 2021. 

Over the whole of 2021, spending on cloud was 8.8% higher than in 2020, reaching a total of $73.9 billion for the year. 

Enterprise spending on traditional IT grew too, but not as fast as cloud spending. Enterprise invested in non-cloud infrastructure to the tune of $17.2 billion, up 1.5% year on year in 4Q21, according to IDC. It marks the fourth consecutive quarter of growth on traditional IT spending, which grew 4.2% over 2020 to $59.6 billion for the year.

Cloud giants are trying to gain an edge on each other in all sorts of ways. Last week a Google Cloud survey argued that government workers were worried that reliance on Microsoft’s products was undermining the government’s cybersecurity: Microsoft didn’t agree.

IDC forecasts that firms will spend $90.0 billion cloud infrastructure in 2022, up 21.7% compared to 2021. The biggest loser is traditional IT spends for organizations that maintain their own infrastructure. CIO spending on non-cloud infrastructure is to decline 0.3% to $59.4 billion. 

However, IDC reckons that spending on shared cloud infrastructure spending will grow 25.5% year over year to $64.5 billion for 2022, while spending on dedicated cloud infrastructure is expected to grow 13.1% to $25.4 billion in 2022.