AWS partners tell CRN: 'We're not worried about cloud growth slow-down'

CRN spoke to partners about recent findings that Amazon cloud growth slowed in Q1 2023 as customers slashed costs

Amazon recently reported Q1 results that showed AWS cloud growth slowed, causing panic amongst investor and a four per cent drop in shares' value.

The results showed revenue at AWS grew 16 per cent to $21.4bn, ahead of forecasts for $21.2bn.

However, Amazon's chief financial officer Brian Olsavsky, reported in the FT, said AWS "customers of all sizes in all industries" were trying to save on costs.

"Customers continue to evaluate ways to optimise their cloud spending in response to these tough economic conditions," he added.

"And we're seeing these optimisations continue into the second quarter with April revenue growth rates about 500 basis points lower than what we saw in Q1."

Channel resilience

And while this news caused some concerns, CRN found out that partners seem prepared to tackle a more cost-conscious customer base.

Jack French, director of Cloud Platforms at reseller giant WWT, said the partner is unfazed.

"I'm not surprised to see the slowdown in growth," he said.

"We have seen incredible growth numbers in cloud year over year, and it seems natural - and somewhat expected with the uncertainty in the economy - that cloud would also be impacted.

"We are hearing it directly from our customers: cloud cost optimisation has been a top five priority over the last year and continues to be one now in 2023 along with filling the ongoing cloud skills and talent gaps."

With regards to future challenges, he explained that cloud customers have signed significant multi-year committed-use contracts with the major public cloud hyperscalers.

"If spending cuts and optimisation efforts impact their ability to meet those commitments, we could see unnatural behaviour - whether it be with Cloud Marketplaces or other means to try and meet those commitments.

"This could potentially create risk in the industry for partners, resellers, ISVs and the cloud providers.

"Plus, if the public cloud hyperscalers are impacted by slowed growth, what impact may that have on their ability to reinvest in infrastructure buildouts, services development, and innovation? The answer to that question could be felt across the entire industry."

However, French explained that to date, they are not seeing a slowdown in professional services requests for cloud migration, digital, cloud security or application development.

"What WWT is seeing is an increase in demand for our cloud FinOps professionals, cloud architects, and cloud cost optimisation specialists, who are now busier than ever helping organisations eliminate cloud waste and inefficiencies while building automation into right-sized cloud environments to reduce spend."

The chief sales officer of pan-European partner Crayon, Gudmundur Adalsteinsson, said the news may be more about a shift to efficiency, rather than just being around spend.

"We're in the business of helping customers get control of their cloud spend, and when companies are well-invested in the cloud, the spending doesn't necessarily decrease long-term, but we are able to rightsize businesses in the short term.

"This rightsizing does, however, normally lead to reinvestment in more cloud investments that make more impact on the business overall.

"As businesses grow, the only way for them to decrease spending is by utilising it in the smartest way, giving them insight into their cloud spend and minimising unnecessary spending.

"Another reason we're not worried about a decrease in cloud spend is that the public cloud is growing. There are a lot of local data centre providers, and we see an increase in usage or in SPLA because data centre providers need to utilize that technology.

"Plus, the world of Open AI, it's all built on the public cloud, and this will drive another huge demand for cloud within companies that we haven't seen before.

"So cloud spend is not on the decline, more likely it is going to continue to rise, but at the same time when the ‘cloud bill' starts to increase, of course, CFOs and CEOs will start looking at why they're spending so much, but it doesn't mean cloud spend will drop, it means executives will be more focused on finding out what's happening with their cloud spend because people want to have more control over their business."

James Campanini, CEO of reseller VeUP, added: "Despite economic uncertainty, the cloud market remains fundamentally strong, serving as the backbone for business operations and growth.

"With organisations looking to reduce overheads in anticipation of further challenges ahead, the elephant in the room is cost optimisation.

The truth is that many companies lack the resources and expertise to optimise their spend in this area.

"Many also see cost optimisation as an afterthought, and do not include it in the design phase.

"Addressing this issue requires businesses to work with dedicated cloud partners who can enable them to realign, access a broader array of services and operate more efficiently to get the most out of cloud and their cloud provider."

AWS' response

CRN reached out to AWS for comment. Paddy Fitzpatrick, their UK ISV lead said:

"In times of uncertainty, it's tempting for customers to cut back and slow down, but often they should be leaning into the cloud so they can improve agility, reduce costs, and drive innovation."

He added: "Our focus remains on continuous innovation to help customers and partners reduce cloud costs and create new ways to increase efficiency, build flexibility, and manage cloud spending...

"Working together with partners, we are building long-term relationships with our shared customers that will outlast all of us.

"Today, there is a real opportunity for our partners to provide services that help control cloud spend and make better use of saving plans."