As the earnings season draws to a close, some new trends in the industry have become a hot topic for many people, such as cloud computing. In the overwhelming publicity and imagination of artificial intelligence technology and application products, cloud computing, which was once a hot spot, has obviously dimmed a lot, but the competition in the industry has not ended.
The revenue and growth rate of the five cloud vendors from 2020 to 2023, data source: company financial report Data Ape is compiled based on public information Note: Alibaba Cloud's revenue data is converted into natural year data based on the data disclosed in its financial report
Cloud vendor revenue comparison Data Ape Charting
Comparison of revenue growth rates of cloud vendors Data Ape Charting
Recently, China Telecom and China Mobile announced their financial reports for 2023, judging from the data, e Cloud's revenue in 2023 will reach 97.2 billion, a year-on-year increase of 67.9%, a rapid growth for 3 consecutive years, and mobile cloud revenue will be 83.3 billion, a year-on-year increase of 65.6%, which is also a rapid growth for 3 consecutive years. The growth rate of Alibaba Cloud and Huawei Cloud, the giants of domestic cloud vendors, has shown a slowdown trend: Alibaba Cloud's revenue growth has gradually slowed down since 2021, and by fiscal year 2023, Alibaba Cloud's revenue will be 77.2 billion, a year-on-year increase of 3.5%. Last year, HUAWEI CLOUD's annual sales revenue reached 55.3 billion, a year-on-year increase of 21.9%.
From the perspective of revenue, operators' cloud services are catching up with Internet carriers at a three-fold "acceleration". Why is the cloud business of operators developing so rapidly, is this development sustainable, and what is the development of operators in the United States when looking at the world, and why is it so "quiet"?
What "external forces" drive the growth of cloud business?
It may be analyzed from four aspects: policy support, resource advantages, technological innovation and market demand.
In terms of policy, national policies strongly support the development of the cloud computing industry, such as the "14th Five-Year Plan" for the development of the digital economy and the "National Cloud Computing New Generation Artificial Intelligence Innovation and Development Pilot Zone Construction Plan", which have created a good policy environment for the development of the cloud computing industry. At the same time, in the context of national security, cloud service providers with the background of central state-owned enterprises have more natural advantages in terms of policy support.
In terms of resource advantages, the three major operators have a nationwide communication network to provide reliable network support for cloud computing services, especially with the wide deployment of 5G networks, the three major operators have natural advantages in providing high-speed, low-latency network services; Therefore, operators have abundant network resources and customer resources, which lays the foundation for the development of cloud computing services.
In terms of technological innovation, the three major operators have invested heavily in cloud computing, with a growth rate of more than 20% in R&D investment in 2023, and the main R&D directions include cloud-network integration, security and trustworthiness, hybrid cloud, edge computing, smart city, etc., and the innovation of products and services continues to meet the diverse needs of different users, while the quality of cloud services is also more secure and efficient, which provides a strong backing for the rapid development of cloud computing.
R&D investment and growth rate of the three major operators from 2020 to 2023, data source: company's financial report
In terms of market demand, with the rise of digitalization and digital and intelligent transformation, more and more enterprises and government agencies have begun to adopt cloud computing technology, and the three major operators have a deep customer base and trust in the government and enterprise market, which makes them occupy a favorable position in the cloud computing service market of governments and large enterprises. On July 12, 2022, the State-owned Assets Supervision and Administration Commission of the State Council held a meeting in Beijing to promote the deepening of professional integration of central enterprises, summarize and exchange practices and experiences, and deploy and promote the next step. For the first time, the meeting clearly mentioned that China Telecom will introduce a number of strategic investors from central enterprises to build a "national cloud" company, coordinate the deployment of scientific and technological innovation, facility construction and security protection system, and accelerate the construction and promotion of the original cloud technology ecology. The concept of "national cloud" has emerged for the first time, and there is no doubt that due to the higher requirements of government and enterprise customers for data security and compliance, they will be more inclined to choose domestic cloud service providers, which provides opportunities for operators to grow their cloud business.
On the whole, Data Ape believes that the rapid development of the three major operators in the field of cloud computing happens to be a joint effect of many aspects, including the innovation of their own products and services, the blessing of external policies and economic environment, and the accumulation and trust of customer resources for many years.
High growth will continue
Is this kind of rapid growth sustainable? First of all, look at the current scale and growth space of the cloud computing market.
According to the China Academy of Information and Communications Technology, the overall scale of China's cloud computing market will reach 455 billion yuan in 2023, a year-on-year increase of 40.91%. Among them, the public cloud market reached 278.1 billion yuan, a year-on-year increase of 50.21%, the private cloud market reached 119.8 billion yuan, a year-on-year increase of 14.31%, and the hybrid cloud market reached 57.1 billion yuan, a year-on-year increase of 68.12%. It is expected that China's cloud computing market will continue to maintain rapid growth in the next few years, with a compound annual growth rate of more than 30%. By 2025, the overall size of China's cloud computing market is expected to exceed one trillion yuan.
The market size of China's cloud computing industry, data source: Academy of Information and Communications Technology
It is not difficult to find that from the data released by the Academy of Information and Communications Technology, the cloud computing market still has a lot of room for growth in the future, and whether it is public cloud, private cloud or hybrid cloud, the market size will continue to maintain rapid growth. Therefore, whether an operator's cloud computing business can maintain rapid growth while there is still room for incremental growth in the industry depends on whether the existing growth factors can be sustained.
At this year's "Two Sessions", the Prime Minister's government work report clearly stated that "formulate policies to support the high-quality development of the digital economy, actively promote digital industrialization and industrial digitization, and promote the deep integration of digital technology and the real economy." Deepen the R&D and application of big data and artificial intelligence, carry out the "artificial intelligence +" action, and build a digital industrial cluster with international competitiveness. ......”
In terms of resource advantages, both network resource advantages and customer resource advantages are wide and deep "moats" for operators, and it is difficult to be broken in the short term.
In terms of technological innovation, the three major operators will increase their investment in cloud computing R&D in 2023, mainly focusing on 5G + cloud collaboration, cloud-network integration, artificial intelligence, blockchain, cloud native, big data, security and trustworthiness, service-oriented, hybrid cloud, smart city, industry applications, open source technology and other fields. It is expected that in the next few years, the cloud computing business of the three major operators will continue to maintain rapid growth, and further improve their market share, technical capabilities, and service levels.
With the rapid development of artificial intelligence models, the application scenarios of the enterprise side may be the first to land to improve the operational efficiency of enterprises, and cloud computing, as one of the basic technologies of AI, will usher in greater development under the wave of AI.
All in all, the rapid growth of telecom operators' cloud services is driven by the digital transformation of the market, their own resource advantages, the strengthening of innovation capabilities, and the support of the policy environment. Data Ape believes that the growth of operators' cloud services may not be short-lived, and this rapid growth may continue in the next 3-5 years. Chinese operators are not only accelerating the development of cloud services, but also promoting the development of the mainland's large-scale model and AI industry at a larger level, playing the role of "behind-the-scenes heroes".
Opportunities in the times
As we all know, computing power is the core resource of the digital era and the foundation for supporting the development of large models and artificial intelligence.
Since the three major domestic operators can start "corner overtaking" in the field of cloud services, why are American operators so "quiet", and can't they "corner overtaking"?
U.S. telecom operators have experienced various ups and downs in the development of cloud computing business, and in the early days of cloud computing, U.S. telecom operators such as AT&T and Verizon tried to gain a foothold in the market by building data centers and providing cloud services. For example, Verizon launched its cloud computing business for large government and enterprise customers in 2009 and had 200 traditional data centers in 35 countries in 2010. However, in 2017, Verizon sold its cloud computing, managed services, and cloud-network collaboration businesses to IBM, exiting the cloud computing market entirely.
Around the same time, CenturyLink, another major U.S. operator, also sold its data center in a $2.3 billion deal. In 2019, AT&T adopted a similar strategy, selling its data center hosting business and assets and shifting its own non-network infrastructure computing needs to Microsoft's Azure cloud.
The main reason why U.S. telecom operators have withdrawn from the cloud computing and IDC market is that their competitors are too "terrifying", and these operators have to face competitors with a lot of talent and capital such as Amazon AWS, Microsoft Azure, Google Cloud Services and IBM Cloud Services on the one hand, and strong independent data center service providers on the other hand. The competitive environment of "blocking in front and chasing soldiers in the back" finally stifled the "cloud dream" of operators.
In the end, Verizon and AT&T embarked on an "asset-light" model in the fierce competition, packaged and sold their data centers, gave up the cloud business, and turned to cooperate with Internet cloud giants.
Currently, there is a "twinning" situation between U.S. carriers and cloud service providers. AT&T and Microsoft Cloud were the first to form a "pair", AT&T moved its own non-network infrastructure computing needs to Microsoft's Azure cloud, and later announced that it would migrate its 5G core network to Azure. Verizon has joined hands with Amazon AWS to develop 5G edge computing services. T-Mobile and Google Cloud have partnered to combine the power of 5G and edge computing to provide more ways for businesses to embrace digital transformation.
With only the network and no cloud, operators in the United States have missed the opportunity in the field of cloud computing, while in China, operators who walk on "two legs" are running forward. China Telecom continues to increase investment in cloud and broadband infrastructure, and e Cloud has formed a "2+4+31+X+O" echelon distribution, becoming the world's largest telecom operator cloud and China's largest hybrid cloud. China Mobile focuses on 5G + cloud collaboration, cloud-network integration, blockchain, artificial intelligence, etc., while China Unicom has made efforts in smart cities, industry applications and open source technologies to continuously improve its competitiveness in the domestic cloud computing market.
The times create enterprises, and operators' cloud services are the trendsetters of the new era......