AWS, Microsoft Azure, Google Cloud See Revenues Grow in Supremacy Battle

Amazon Web Services, Microsoft Azure and Google Cloud over the past week all reported steady and significant revenue growth, a signal that the global public cloud market is continuing to expand rapidly and that these three providers continue to dominate it.

It also dovetails with the findings by analysts with Synergy Research Group, who said this week that in the second quarter, spending on cloud infrastructure services increased 39% year-over-year. While the rate of growth is slowing slightly, it has more to do with the massive scale of the market, the analysts wrote. In terms of hard figures, spending during the quarter grew by more than $1.6 billion over the previous quarter, the second-largest incremental increase ever.

Overall, revenue in cloud infrastructure services hit almost $23 billion, with revenue over the last four quarters exceeding $80 billion.

“Revenues from cloud infrastructure services have almost hit the $100 billion per year run rate, and there is no end in sight to strong growth,” said John Dinsdale, a chief analyst at Synergy Research. “When quarterly spend on cloud services is mapped out for the last 12 quarters, we are pretty much looking at a steep, straight-line growth profile.”

Amazon’s’ Brian Olsavsky

Individually, the top cloud providers all said they had strong second quarters. AWS, which Synergy said holds about 33% of the global market – more than the four trailing providers, Azure, Google Cloud, Alibaba and Tencent, put together – saw sales of about $8.4 billion, representing 37% growth. Azure saw revenue in its commercial cloud business grow 39 percent, to $11 billion, while Google’s cloud business – which includes both Google Cloud Platform (GCP) and G Suite – saw its annual run rate reach $8 billion, twice the $4 billion announced last year.

During a conference call July 25 to discuss the quarterly numbers, Brian Olsavsky, senior vice president and CFO at Amazon, pushed back at the idea that the AWS business may be slowing down. The company saw 49 percent growth in the first quarter.

“We feel this was a really strong quarter,” Olsavsky said, according to a transcript on Seeking Alpha. “We’re very happy with the growth in absolute dollar terms and we’re seeing a pickup from customers and their usage, their increased pace of enterprise migration, increased adoption of our services especially our machine learning services.”

In a similar conference call July 25, Sundar Pichai, CEO of Google parent company Alphabet, said companies like Lowe’s and HSBC are choosing Google Cloud for such reasons as reliability, uptime, analytics and the ability to move into the cloud at their own pace. Pichai pointed to the launch in April of Anthos, which enterprises can use to run Google Cloud applications and services in their own data centers on infrastructure from such vendors as Hewlett Packard Enterprise, Dell EMC and Lenovo.

Ruth Porat, senior vice president and CEO for Alphabet, said during the call that “growth in GCP was led by strong customer demand for our compute and data analytics products and G Suite continues to deliver strong growth. … Overall, GCP remains one of the fastest growing businesses in Alphabet.”

Enderle Group’s Rob Enderle

Synergy Research analysts see the market as being dominated by AWS followed by Azure, Google Cloud, Alibaba and Tencent. There are four other market leaders – IBM, Salesforce, Oracle and Rackspace – according to the analysts, but “their growth rates are lower and they are more niche-oriented.”

Rob Enderle, principal analyst with The Enderle Group, told Channel Futures that the “cloud market remains strong, but power is clearly coalescing at the top. It will continue to grow until an equilibrium is reached with on-premises [infrastructure], then likely pull back a bit. There’s no real sign we are close to that point yet.”

IBM still has the potential to break into the top tier of cloud providers, and while there is obvious regional power among Chinese providers like Alibaba and Tencent, “they have yet to show much strength out of China. The market isn’t mature yet and the technology is in flux, so additional changes and disruptions remain likely,” Enderle said.

Grant Kirkwood, CTO and co-founder of Unitas Global, a managed cloud service provider that works with AWS, Azure and Google Cloud, told Channel Futures that given AWS’ lead in the market, it’s not surprising that …

… Azure and Google Cloud have been able to show significant growth.

“As the cloud market and the cloud buyer are maturing, so are how different clouds are used for different workloads,” Kirkwood said. “Sophisticated buyers know the unique capabilities of each cloud and are levering best-of-breed consumption in multiple clouds.”

Whereas several years ago the default answer to the public cloud was to go all in with AWS, Microsoft and Google Cloud have become more price-competitive, often dropping their rates below AWS to secure a new customer, he said. The two also have upgraded many of their services, making their offerings easier to use.

“Microsoft and Google are also more heavily leveraging the channels and marketing to better position themselves with new customers,” Kirkwood said. “This is not a surprise as it’s very much a part of the history and DNA of these companies. Microsoft and Google are continuously funding programs and initiatives for their channel partners. As a partner of each, it’s clear that Microsoft and Google are more willing to invest financially and programmatically in their channel partners to ensure joint success in this highly competitive market.”