- 28 December، 2022
- Posted by:
- Category: Uncategorized
By Tobias Mann – The Register
When the major cloud providers warned of slowing customer demand earlier this quarter, many expected them to pull back on their capex expenditures until the latest macroeconomic headwinds had blown over. Only, they didn’t.
Week after week, the major cloud providers have pushed ahead. They’ve announced new capacity, availability zones, and regions across Central and South America and sub-Saharan Africa – all markets that have undergone an explosion of demand for cloud services over the past two years.
Amazon Web Services (AWS), Microsoft Azure, and Google Cloud overwhelmingly dominate the US and European markets – and if they have their way, they’ll control an even larger stake in these emerging markets too.
Laying the groundwork for world domination
For a cloud region to be viable, there needs to be a critical mass of businesses and customers with ready access to the internet. Over the past several years, cloud providers like Microsoft and Google have gone to great lengths to create and cultivate that demand.
Microsoft’s Airband initiative is a prime example. The program, which works with local ISPs and satellite internet providers, seeks to bring internet service to a quarter of a billion underserved people around the globe by 2025.
The latest phase of the program, announced this week, focuses on closing the digital divide across large swaths of Africa. Just 40 percent of the continent’s 1.4 billion people have access to the internet, and more than 600 million live without power, according to the International Telecommunication Union and the International Energy Agency. Microsoft aims to bring internet service to 100 million Africans within the next three years and is working with Viasat to reach some of the most remote residents.
Across the Atlantic, Google has been focusing much of its attention on the Latin and South American markets. Earlier this year, it announced a five year, $1.2 billion initiative to expand the availability of its services in the region.
“In Latin America, realizing the potential of digital technologies could generate an annual impact of $1.37 trillion in six of the region’s largest economies,” Google CEO Sundar Pichai wrote in a June blog post.
Like Microsoft’s Airband, Google’s investments are largely centered around increasing Latin America’s access to digital services – in short, creating customers.
AWS execs, meanwhile, told Reuters in July that the biz would expand its presence in Latin America with the construction of a $205 million datacenter in Chile and the creation of financing programs designed to help startups grow their businesses.
In 2022, AWS announced new availability zones in Columbia, Argentina, Peru, Mexico, Brazil, and Chile, and Google Cloud spun up datacenters in Mexico and South Africa. Meanwhile, Microsoft, which already has a presence in Brazil, plans to open datacenters in Chile and Mexico.
And according to Gartner, there’s good reason to make these investments now. Over the past few years, the analysts have tracked an explosion of cloud spending in these markets. They found that in 2021 cloud spending in Latin America and sub-Saharan Africa grew 26.7 percent and 30 percent respectively. And by 2023, Gartner projects that cloud spending in these markets will have roughly doubled from 2020 levels.
Gartner does expect this rate of growth to slow somewhat by 2025, which isn’t that surprising. Unless these services can be opened to a greater share of the populace, the addressable market will become saturated very quickly.
Clearly, the cloud providers believe their efforts to expand their potential markets will be successful, and that access to the internet will breed greater demand for cloud and datacenter infrastructure. They may be right.
You call it altruism, we call it self serving
Just as countless governments and empires have over the past half millennium, the major cloud providers will paint these investments as an altruistic effort to bring vital infrastructure, services, and jobs to underserved regions. And if it stopped there, that might be alright. But in reality the cloud providers are motivated by their desire to get more customers for their products.
In his blog post earlier this year, Pichai did little to disguise this fact: “We’ve been investing to improve connectivity and increase Latin America’s access to digital services, including Google products, like search, Gmail, YouTube, as well as Google Cloud,” he wrote. Such is the nature of business, of course.
But as we’ve seen play out over the past decade, all of this comes at the cost of stifling local competition. In Europe, antitrust lawyers are still grappling with the outsized influence of foreign cloud providers. There, the big three control 72 percent of the market, according to a Synergy Research Group report published earlier this fall.
But the courts are slow, and these emerging regions are hungry to capitalize on the promise of the cloud. So of course they’ll welcome the cloud providers with open arms – leaving it to future generations to recognize their “gifts” as pox-laden blankets that poisoned any hope for home grown competition.