- Cloud deals took about 50% longer than normal to close in Q1 as customers slashed IT budgets.
- Deal cycles are back to closing at about 30 to 60 days in Q2, a Mizuho Bank report said.
- The demand for generative AI, which operates in the cloud, has driven the stabilization.
The big cloud-computing budget cut could be subsiding thanks to generative AI, and Amazon Web Services could benefit massively, according to a new survey of CIOs from Mizuho Bank.
In anticipation of a recession, companies began to slash IT budgets last year, causing the cloud-computing industry’s first-ever slowdown. Just last quarter, cloud deals took about 50% longer than typical to close, and discounts of about 30% to 40% were common for cloud services across the board, according to Mizuho Bank’s survey of CIOs at 300 Fortune 1000 companies.
Since then, cloud deals have closed at a “normal” rate in the second quarter, and cloud providers largely only made price concessions when large customers signed multiyear contracts, the survey shows.
CIOs who were focused on trimming cloud budgets in the first quarter are now looking to spend those savings on generative AI. As customers race to implement generative-AI technology and buy the cloud storage and services needed to support it, AWS is poised to take advantage of it, the Mizuho report said.
“Generative AI is driving the next super cycle of cloud adoption that accelerates mass-market migration over the next few years, since the new technology can only deploy efficiently in the cloud,” the report said.
Customers are especially excited about Bedrock, Amazon’s foundational model for developers to build generative AI on, because of its privacy features, the survey said. Mizuho Bank estimates that AWS Bedrock, announced in April, has garnered a list of 200 companies waiting to train and launch generative-AI apps.
This could be a boost to AWS, the market’s leading cloud provider. AWS reported its slowest growth rate to date for the first quarter of 2023. The increase of about 16% paled in comparison to the roughly 40% jump AWS tracked for the first quarter of 2022. While AWS still turned a profit in Q1, its slowdown was “unwelcome,” Bernstein tech analysts wrote at the time.
AWS’s biggest rival, Microsoft, has invested billions in OpenAI, the maker of ChatGPT; and Google introduced Bard, its own generative-AI chatbot, earlier this year. Analysts had previously said that AWS lagged behind its competitors in the AI race. The Mizuho Bank survey shows that CIOs may feel differently.