IT cos upbeat on cloud hyperscalers

The growth in the cloud business of hyperscale companies is expected to have a domino effect on the growth of the Indian IT sector’s cloud business. With the management of these companies investing in higher capital expenditures to support their cloud business expansion, the Indian IT sector is well-positioned to capture the opportunities from the accelerated cloud migration activities by enterprises

Bengaluru: Growth of cloud hyperscalers like AWS (Amazon Web Services), Microsoft Azure & Google Cloud is likely to bring more cloud-related businesses for Indian IT services companies in the coming quarters.

As Indian IT services companies- both large and mid-tier ones- have significant engagement with these hyperscalers, their growth will have a positive impact on the cloud-related business of domestic IT firms.

“The demand for AI technology has been a major driving force behind the growth of these companies (hyperscalers), with enterprises focusing on infrastructure modernization and shifting to the cloud. As more companies complete their cost optimisation efforts and turn their attention to AI, the growth momentum of these companies is expected to continue,” Mirae Asset Capital Markets said in a report.

“The growth in the cloud business of hyperscale companies is expected to have a domino effect on the growth of the Indian IT sector’s cloud business. With the management of these companies investing in higher capital expenditures to support their cloud business expansion, the Indian IT sector is well-positioned to capture the opportunities from the accelerated cloud migration activities by enterprises,” the report noted.

The cloud business of the top three hyperscale companies (AWS, Azure, Google Cloud) continues to grow at a steady pace, with an average growth of 26 per cent year-on-year growth. This is majorly attributed to the increasing use of AI technology in various industries.

While AWS experienced a 19 per cent growth in revenue in Q2CY24 (April-June), while Google Cloud saw an acceleration in its growth at 29 per cent. Azure also saw a strong revenue growth of 29 per cent during this period.

As AI (artificial intelligence) sees more adoption across industries, enterprises are spending more on cloud migration projects.

According to analysts, Indian IT firms have set up centre of excellence in collaboration with different cloud hyperscalers. They have also trained their employees in different cloud-based applications.

Some recent reports also suggested that Indian IT firms have started receiving benefits of the recent AI-surge. In a recent filing, the consumer giant Coca Cola said that out of $175 million spend in cloud migration with Microsoft Azure, about $27 million will go to Infosys.

In that regulatory filing this month, Coca-Cola Euro Pacific Partners PLC, a subsidiary of The Coca-Cola Company, said: “During the first half of 2024, the group made a commitment to TCCC (The Coca-Cola Company) to invest €167 million with Microsoft for Azure cloud migration services over a 6-year term. A further €25 million has been committed to Infosys who will act as a supporting partner.”

Reports suggested that the technology contract could be around $100 million for Infosys if all the geographies were taken into account.

Sources in the know said that rising adoption of AI is leading to more spend on cloud technology, which will be beneficial for Indian IT firms.

“Indian IT firms have a matured cloud practice and any new spend from enterprises will translate into contracts,” the person said.