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Cloud hangs over IT cos' revenues

Growth acceleration seen during Covid pandemic period is now stabilizing as revenue growth of cloud hyperscalers declined in Sept qtr; Such moderation means Indian IT firms may not see superlative growth as global enterprises slashing their cloud spending

Cloud hangs over IT cos’ revenues
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Cloud hangs over IT cos’ revenues

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Bengaluru: Indian IT services players are likely to see growth moderation in their cloud technology portfolio as indicated by the performance of cloud hyperscalers in the September quarter. Experts are of the opinion that the growth acceleration seen during the Covid pandemic period is now stabilizing. Such moderation means Indian IT firms may not see superlative growth that they are expecting from their cloud portfolio.

"Global cloud service providers have seen moderation in their growth numbers. This indicates that demand environment is slowly stabilizing. Against this backdrop, the cloud portfolio of Indian IT firms may grow slowly as compared to previous year," said Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting.

In the quarter ended September, all three major hyperscalers have seen growth rate coming down in their cloud services portfolio.

Microsoft's intelligent cloud business, which includes Azure, reported a slowdown in its rate of growth in September quarter. Its segment revenue grew 20 per cent to $20.3 billion during September quarter as compared to 31 per cent growth reported in the same quarter last year.

Similarly, Amazon's market-leading AWS grew 27 per cent year-on-year, reporting net sales of $20.5 billion during September quarter. In the same quarter last year, it reported 39 per cent growth YoY basis.

Alphabet, Google's parent company, reported $6.9 billion in revenue from Google Cloud in its Q3 earnings, up 37 per cent over last year. However, it represents a slowdown from the 45 per cent YoY growth in cloud revenues Alphabet reported in the same period of last year.

As the fears of recession looms, enterprises are cutting down cloud spending or deferring new spending in this segment. Especially, software as a service (SaaS)-related spends are coming down in recent months as enterprises tighten belts to save costs.

Cloud adoption rate touched a record high during the pandemic as small and big businesses and organisations went online for reaching out to their customers. Most Indian IT firms are betting big on the cloud services with specialised offerings. Large IT firms such as Tata Consultancy Services (TCS), Infosys, Wipro and HCL Tech have created separate cloud offerings by putting all their services under one umbrella.

"Digital deals are likely to face some slowdown as the base of digital revenue for most IT firms have gone up in recent years. However, there will be no degrowth kind of scenario, rather it is growth moderation," said Jain.

Debasis Mohapatra
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