digital transformation
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The growing demand for cloud computing in recent years has shown that businesses still hope to rely on the cloud to store, manage and process critical data. The global cloud computing market size is projected to reach $791.48 billion in 2028, at a compound annual growth rate (CAGR) of 17.9% from 2022 to 2028.

Some key factors driving the growth of cloud computing are the ever-increasing volume of data generated by websites and mobile apps, the growing need to optimize applications using artificial intelligence (AI) and machine learning (ML), and the need to accelerate disaster recovery among other factors.

However, despite the growing interest in cloud computing, emerging market reality has shown that there is a massive gap in the cloud market shares among top U.S. cloud service providers and their European counterparts. Although European cloud providers have shown signs of growth in the market, recent studies have revealed that they continue to lose ground in the market to major U.S. cloud providers like Microsoft, Google and Amazon.

Providing more insight into the above, new data from Synergy Research Group (SRG) shows that the European cloud market is now over five times as big as it was in early 2017, reaching $10.9 billion in the second quarter of 2022. Over that same period, the data showed that European cloud service providers had grown their cloud revenues by 167%, but their market share dropped from 27% to 13%, while the U.S. big players continued their relentless dominance in the market.

According to SRG, the primary beneficiaries of the market growth have been Amazon, Microsoft and Google. These three account for 72% of the regional market share. The data from SRG further points out that among the European cloud providers, Deutsche Telekom and SAP are the leaders, each accounting for 2% of the European market. They are trailed by OVHcloud, Telecom Italia, Orange, and a list of other national and regional cloud service providers.

Factors behind the vast market share disparity

The difference in the investments made by European cloud providers and their U.S. counterparts could be a key factor affecting the European names. Data from SRG clearly shows that European cloud infrastructure service revenues totaled about $26 billion in the past four quarters, offering 41% from the preceding four quarters.

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John Dinsdale, a chief analyst at Synergy Research Group, reiterates why huge investment in the cloud has been a key factor in ensuring the U.S. cloud giants maintain the lion’s share in the global cloud market.

“The cloud market is a game of scale where aspiring leaders have to place huge financial bets, must have a long-term view of investments and profitability, must maintain a focused determination to succeed, and must consistently achieve operational excellence,” said Dinsdale. “No European companies have come close to that set of criteria, and the result is a market where the six leaders are all U.S. companies.

“As U.S. cloud providers continue to invest over $4 billion every quarter in European Capex programs, that presents an impossible hill to climb for any companies who wish to seriously challenge their market leadership. Consequently, European cloud providers have mostly settled into positions of serving local groups of customers that have some specific local needs, sometimes working as partners to the big U.S. cloud providers. Some of those European cloud providers will continue to grow, but they are unlikely to move the needle much in terms of overall European market share.”

In other words, it’s safe to presume that apart from committing huge financial investments to grow their brand and services, another factor that could be fueling top U.S. cloud providers’ overarching dominance is the fact that these big U.S. cloud players have been on the scene for many decades, and businesses tend to trust them more than the smaller cloud providers.

Any hope for the European cloud providers?

In the past week, this wide gap in the cloud market share has been a concern for Ofcom, the U.K. communications regulatory body. This situation has prompted the regulator to launch a probe on how the cloud titans, namely Amazon, Microsoft and Google, are running their cloud services in the U.K.

It is expected that if anything fishy is found, some sanctions might be recommended to the U.K. government to further regulate cloud provisions in the country. If this is done, it might open up the cloud market to the smaller players in the U.K. and other regions where the big three have an overwhelming dominance in the cloud market.

In a similar development, news coming from The White House suggests that the U.S. government may be launching an attack on big tech companies over their impact on the broader market. Whether the outcome of this attack on the tech giants would affect their dominance in the cloud market or not remains to be seen. Nevertheless, given the realities on the ground, it is difficult to say whether anything could be done to deter the dominance of these big three in the cloud market.

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