Cloud Computing Market Spending Grows 18% in Q3 2023, Cloud Providers Remain Focused on AI Innovation and Investment
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According to Canalys estimates, mainland China's cloud infrastructure services spending grew 18% year-on-year in Q3 2023, reaching $9.2 billion, accounting for 12% of global cloud spending. Cloud service providers remain focused on AI innovation and investment, continuously launching new AI products and solutions.
In the third quarter of 2023, China's top three cloud service providers—Alibaba Cloud, Huawei Cloud, and Tencent Cloud—collectively grew their market share by 22%, accounting for 73% of customer spending. Among Chinese cloud service providers, the focus on cultivating and prioritizing partner ecosystems is rising. In Q3 2023, cloud revenue generated through channels in the Chinese market accounted for 25% of total revenue, up from 23% in the previous quarter.
Although China's cloud market may be in a phase of steady growth, top cloud service providers continue to invest heavily in AI technology, demonstrating their collective commitment to embracing this growth trend. Recognizing that the development of AI technology is closely tied to partner support, most providers acknowledge the importance of nurturing a partner ecosystem. The complexity of AI technology presents challenges in adoption and deployment, but also offers opportunities for a broader AI ecosystem. This quarter, Alibaba Cloud and Huawei Cloud launched AI model development platforms that allow the integration of third-party open-source AI models, enabling developers to access and train various models on their respective cloud platforms.
"Without the help of various partners, it is almost impossible for vendors to achieve widespread deployment of AI technologies. This largely depends on the AI ecosystem including developers, independent software vendors (ISVs), and experts, which will be crucial for delivering value to customers at scale," said Canalys analyst Yi Zhang. "Collaborations like those between Salesforce/Databricks and cloud hyperscalers AWS/Google demonstrate that partnerships among cloud service providers—both between CSPs and across different CSPs—are strategic necessities. Combining technical supply with expertise is essential for seizing market growth opportunities and driving value."
Alibaba Cloud became the market leader with a 39% share in Q3 2023. In its recent financial report, Alibaba announced the abandonment of its plan to spin off its cloud business division. Meanwhile, Alibaba Cloud is optimizing profitability by reducing operations on low-margin projects. Despite slowing revenue growth, Alibaba Cloud remains committed to launching new AI products. In October 2023, it launched the 'Bailian' platform, a one-stop AI foundational model development platform. This platform simplifies complex tasks for users, including model selection, fine-tuning, training, and development, while providing access to multiple AI foundational models. In terms of capital investment, Alibaba Cloud announced in September the official opening of its first data center in China's central region, located in Wuhan.
Huawei Cloud maintained its position as the second-largest cloud service provider in Q3 2023, with a market share of 19%, representing a 16% year-on-year growth. Huawei Cloud launched the AI Gallery platform in September 2023, which integrates various open-source AI foundational models. The platform is designed for global enterprises and developers, facilitating the customization of AI model applications. As part of its strategic initiative for global business expansion, Huawei Cloud held the Huawei Connect conference in Paris in November 2023. The event aimed to strengthen its partner ecosystem in Europe, with Huawei Cloud revealing a 400% year-on-year increase in the number of European partners in 2023. Looking ahead, Huawei Cloud aims to support 1,000 European startups in their cloud development over the next five years.
Tencent Cloud grew by 14% in the latest quarter, capturing a 15% market share. Its performance exceeded expectations after the decision to abandon low-quality, low-value projects. As competitors intensified their focus on building partner ecosystems, Tencent Cloud also announced updates to its partner development in September. It revealed plans to expand the range of cloud services available for channel partners to sell from 80 to over 110 this year, with the ultimate goal of granting partners sales rights for all products. Tencent Cloud is also investing in its channel ecosystem by enhancing support for partners and increasing the number of channel managers and architects among its employees by 30% to facilitate collaborative engagement with partners.
Canalys defines cloud infrastructure services as those providing Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), whether on dedicated private infrastructure or shared public infrastructure. This excludes direct Software as a Service (SaaS) spending but includes revenue generated from the infrastructure services used, as well as hosting and operating these services.