In most mature industries, there are two dominant players.
Smartphones: Android and iPhones.
PCs: Macs and Windows; and so on.
Public Infrastructure-as-a-Service (IaaS) clouds aren’t there yet. But Morgan Stanley, the global financial services company, thinks it will come down to Microsoft Azure and Amazon Web Services (AWS).
However, in a new report by Synergy Research Group, AWS “remains in a league of its own, almost three times the size of its nearest competitor and with a clear lead in all major regions and most segments of the market.”
According to Synergy, AWS, Microsoft, IBM Softlayer and Google Cloud control well over half of the worldwide cloud infrastructure service market. They also continue to grow more rapidly than their smaller competitors.
All together, the big four grew their cloud infrastructure service revenues 68 percent in Q2 of 2016. At the same time, the next 20 largest cloud providers grew by 41 percent, and all other smaller providers grew by 27 percent.
All-in-all, the market grew by 51 percent. Meanwhile, Microsoft and Google can point to substantially higher growth rates, while IBM continues to feature strongly thanks primarily to its leadership in the hosted private cloud segment.
With most of the major cloud providers having now released their earnings data for Q2, Synergy estimates that quarterly cloud infrastructure service revenues (including IaaS, PaaS and hosted private cloud) have reached the $8 billion milestone, while trailing 12-month revenues are close to $28 billion.
North America continues to account for over half of the worldwide market. The Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) regions are similar in size, though APAC has a higher growth rate.
That puts the annual revenue for public clouds well on the way to a $30-billion year. The trailing 12-month revenue exceeded $23 billion. In short, the cloud is big business.
“In a variety of ways Amazon and the other big three players have distanced themselves from the competition in this market and continue to widen the gap,” says John Dinsdale, a chief analyst and research director at Synergy. “What marks them out as different is their global presence, marketing muscle, ability to fund huge investments in hyperscale data centers and, in most cases, a determination to succeed in the market.”
“The ranking of the next 20 largest cloud providers features some interesting companies, with Alibaba and Oracle growing particularly strongly,” he continues. “[B]ut they are all starting from a long way behind Google, which is itself growing by well over 100 percent per year and yet remains only a sixth the size of Amazon.”
So given all this — and no one really disagrees with these numbers — does Morgan Stanley think Microsoft will eventually turn the public cloud into a two-cloud service race? The company based its prediction on a CIO cloud adoption survey. The CIOs think that Azure is going to jump by almost 20 percent in the next three years. In particular, they think that companies holding out against the cloud are going to turn to the public cloud at a 43.8 percent rate in the coming years.
Will the public cloud become a two-player market by 2019? I doubt it.
Yes, Azure is growing fast, but so is Google. I think it’s way too early to declare a real challenger to AWS.