Cloud projects keep being postponed amid economic uncertainty

OVH joins AWS, Microsoft and others in saying customer deals not dead... they're just resting

OVH has clipped financial targets to reflect the slowdown in growth rates across the sector already noted by rivals including AWS, Microsoft and Google, pointing the finger of blame at customers postponing projects.

Europe's largest provider of fluffy white tech services – albeit at a fraction of the size of the three US businesses above – today said [PDF] it expects full-year turnover to advance by 13-14 percent instead of 14-16 percent.

OVH latest numbers

For the year Q2 of its fiscal 2022 ended March 31, OVH reported revenue up 15 percent year-on-year to €439.3 million.

Private cloud (bare metal and hosted private cloud) was up 17.2 percent to €139.9 million, the Public Cloud division grew more than a quarter to €38.2 million and Webcloud & Other grew 0.4 percent to €45.1 million.

OVH said it won over new customers in the quarter in "key sectors" including insurance, healthcare, defense and finance, and had a strong organic retention rate of existing punters. The number of third parties selling its services has now surpassed 1,250, which is a pillar of its strategy to grow.

Demand for "sovereignty-related offers" was at a "sustained level, testifying to the increasing demand from major companies and the public authorities for these issues." And OVH launched a refreshed Platform-as-a-Service to include database, storage and container services, reaching "several thousands customers."

As has happened with Microsoft, OVH pushed up its prices in the first half of its fiscal 2023 "in response to the increase in its production costs," it said.

"This progressive price increase did not affect churn or customer acquisition dynamics. These price increases will continue in the second semester and OVHcloud expects to benefit from the full effect of these price increases from the fourth quarter of 2023."

With more than 30 datacenters worldwide, OVH said capital expenditure was "contained" in the quarter.

For the half-year, revenue was up 15 percent to €439 million.

Likewise, earnings before income tax, depreciation and amortization – a financial metric used by investors and biz owners that strips out some costs – is projected to now come in above 36 percent rather the 39 percent first forecast.

OVH said: "This growth target includes the solid first-half performance and recent developments in demand which in the short term reflect a delay in certain migration projects to the cloud out the extension of existing infrastructure."

It added that a "cost control plan has been put in place" to beef up margins and "continue to control capital expenditure," which is significant (€194 million in first half of fiscal 2023 ended March) for a company with more than 30 datacenters worldwide.

The sentiment from OVH is mirrored in comments made by the Uptime Institute in January when it said growth figures from the hyperscalers indicated the era of hyper-expansion was coming to an end.

"Cloud development projects are no different from many others and are likely to be postponed or deprioritized due to rising costs, skill shortages and global uncertainty," the Uptime report says.

"Public cloud is not always cheaper than on-premises implementations, and many organizations may have concluded that migration is just not worthwhile in light of other financial pressures," the institute added.

AWS boss Andy Jassy last week told investors that customers said they were "not cost-cutting as much as cost-optimizing so they can take their resources and apply them to emerging and and inventive new customer experiences."

He admitted "these short-term headwinds soften our growth rate." Growth rates for all cloud suppliers went mad during the pandemic, but just as the frenzied period of recruitment wasn't sustainable for Amazon, Microsoft and Google, neither is an ever-expanding cloud footprint for a business customer.

Microsoft warned of slowing Azure sales in its last quarter ended December 31. CEO Satya Nadella said: "Just as we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimize that spend."

Gartner today forecast that public cloud sales would grow 21 percent to $597.3 billion in 2023, with SaaS the biggest single component. ®

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