Microsoft leads in Australia's booming IaaS market, surpassing Amazon

The Australian infrastructure as a service (IaaS) market experienced significant growth in 2023, expanding by 20.76% to reach AUD $3.3 billion, up from AUD $2.7 billion in 2022. Gartner's latest report reveals that Microsoft has surpassed Amazon to become the leading provider in this sector within Australia, securing a 30.9% market share. Amazon follows closely with 30.1%, while Google holds 20.6%, IBM has 4.7%, and Oracle possesses 2.4% of the market.

The global IaaS market also saw notable growth, expanding by 16.2% in 2023 to a total of USD $140 billion, up from USD $120 billion in 2022. Despite Microsoft's advancement in the Australian market, Amazon retained its position as the global leader in the IaaS sector in 2023. The top global providers include Amazon, Microsoft, Google, Alibaba, and Huawei.

Sid Nag, VP Analyst at Gartner, said, "Cloud technologies continue to be a major business disruptor, due in part to the focus on hyperscalers looking to support offerings related to sovereignty, ethics, privacy, and sustainability. This should continue to drive exponential growth into the future with these offerings being spurred by generative AI (GenAI) investments for 2024 and beyond."

In terms of global revenue, Amazon maintained its top position in 2023 with revenue of USD $54.6 billion, accounting for 39% of the market share, though this was a slight decline from its 39.9% share in 2022. Microsoft followed with a 23% market share, generating USD $32.2 billion in revenue. Google, which saw a growth rate of 26.3% in 2023, secured the third position with an 8.2% market share and revenue of USD $11.5 billion. Alibaba held the fourth position with 7.9% of the market, while Huawei rounded out the top five with a 4.3% share.

Sid Nag elaborated on the role of AI in driving these changes, stating, "As the top hyperscalers continue to grow their IaaS offerings in the shadow of GenAI, we should also see other areas, such as software-as-a-service (SaaS) and platform-as-a-service (PaaS), grow as well. IaaS is the tide that lifts all boats."

Nag added, "Cloud is the foundational and scalable substrate required to make GenAI a reality. The segments that are beginning to see the impacts of GenAI include IaaS, where AI model training is consuming IaaS resources, and SaaS, where GenAI capabilities are beginning to be included in SaaS applications."

The rising demand for AI-driven capabilities is expected to significantly influence the IaaS market. Nag highlighted that "Capacity demand in public cloud markets has already increased sharply as a result and will continue to do so through 2028. In the near term, AI-driven revenue growth will be small relative to the overall public cloud market."

The market analysis points towards continued growth in the IaaS sector, which is driven by innovations and increasing adoption of cloud technologies. Gartner's findings provide a comprehensive view of the market dynamics, reinforced by the growing importance of AI and other emerging technologies in shaping the future of cloud services.