Cloud services spending jumps to more than $18 billion in US during first quarter

The increase was driven by digital transformation projects, including the restart of projects helped by the economic recovery, says Canalys.

Cloud computing concept

Image: 3dreams/Shutterstock

Organizations in the US spent more than $18 billion on cloud services just in the first quarter of 2021, according to a Tuesday report released by research firm Canalys. Representing a gain of 29% from the same quarter in 2020, the growth in spending was the highest seen in two years, pointing to strong demand for cloud infrastructure services.

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Canalys attributed the higher spending to a greater focus on digital transformation projects during the coronavirus pandemic. With the economy recovering from last year's slowdown, many large enterprises and other organizations have been restarting cloud migration projects that were put on hold or delayed.

Further, demand for digital services continues to surge due to ongoing remote work and learning, content streaming, online gaming and e-commerce.

The United States was the largest market for cloud infrastructure services last quarter, accounting for 44% of global spending. The U.S. government has been paving the way for increased spending on cloud services by adding $1 billion to the Technology Modernization Fund as part of the American Rescue Plan. Further, cloud spending by the government is expected to jump this year, buoyed by efforts to modernize technology and strengthen the nation's cybersecurity.

"Cloud service providers have a big opportunity with the US government, not only with its stated desire to modernize technologies, but also its renewed focus on cybersecurity efforts," Canalys VP Alex Smith said in a press release. "The recent SolarWinds hack affected nine federal agencies and the Colonial Pipeline hack exposed the high risk all organizations face. With intense competition over large government cloud contracts, such as the $10 billion JEDI contract, a security advantage will pay off for bidding cloud service providers."

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Image: Canalys

As spending has risen, the major cloud providers have been expanding infrastructure and building out their dedicated services across the U.S. The country's top three cloud providers last quarter were Amazon Web Services (AWS), Microsoft Azure and Google Cloud, which collectively snagged 69% of all spending.

Grabbing a 37% slice of the U.S. cloud infrastructure market, AWS recently added to its active regions with a second local zone in Los Angeles. The company is also eyeing new zones in New York City, Chicago and Atlanta this year.

In second place with a 23% market share, Microsoft Azure has eight live regions in the U.S. with plans to expand to Georgia and Arizona in 2021. Microsoft also recently announced its goal of building out 50 to 100 new data centers each year around the world. Holding a 9% share of the market, Google Cloud kicked off two new regions last year in Salt Lake City and Las Vegas, giving it a presence in seven regions across the U.S.

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Image: Canalys

In Canalys' dictionary, cloud infrastructure services are those that provide infrastructure as a service and platform as a service, either through dedicated hosted private infrastructure or through shared infrastructure. The numbers exclude spending on software as a service but include sales from the infrastructure services used to host and operate them.

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