We’ve long stated that the next ten years in cloud computing will not be the same as the previous ten. With the momentum of the entire multitrillion-dollar IT industry behind it, the cloud has firmly planted its footprint on the other side of the gap.
Cloud technologies are being used by both sellers and buyers, and many are establishing their own value layers on top of the cloud. We expect innovation will continue to cluster around the main three U.S. clouds, as well as Alibaba in Asia-Pacific, in the coming years, with the ecosystem generating value on top of the hyper scalers hardware, software, and tools.
We do not, however, perceive this as a race to the bottom. Rather, we anticipate that the major public cloud vendors will continue to innovate, automate, and integrate their platforms to reduce costs. Hyperscale clouds will be used by other cloud providers and the ecosystem, including traditional information technology purchasers, to mine opportunities in their respective industries. It’s not a zero-sum game here.
Google Cloud
To be fair, Google continues to receive good grades for the quality of its technologies. According to the Duckbill Group’s Corey Quinn, Amazon and Google Cloud are “neck and neck in terms of reliability,” with Microsoft Corp.’s Azure behind due to major outages in the past. Despite the recent high-profile AWS outages, these statements were made last week in a Bloomberg piece. A Microsoft spokeswoman, predictably, claims that the company’s cloud provides “industry-leading reliability” and that it provides clients with payment credits in the event of interruptions.
Microsoft Azure
In the December quarter, Microsoft’s overall cloud business reached $22 billion, up 32% year over year. Microsoft, like Google, includes application software and software-as-a-service products in its cloud numbers, as well as providing morsels of information on its Azure infrastructure-as-a-service business. We believe Azure accounts for around 45 percent of Microsoft’s overall cloud business, which we estimate reached a run rate of $40 billion last quarter. In its results call, Microsoft stated that recent decreases in Azure growth rates will be reversed in Q1 and that a sequential increase will be seen.
AWS
Finally, Amazon revealed that Graviton2 instances are used by 48 of its top 50 clients. What is the significance of this? Because AWS is well ahead of the competition in custom silicon chips and has a considerably better price-performance curve than x86-based competitors. One of the reasons why this isn’t a race to the bottom is because of this. Google, Microsoft, and Alibaba are all following AWS’ lead in silicon, which will continue to bring down internal costs and offer price/performance curves that are on par with or better than previous Moore’s Law curves.
Despite having a massive presence and tens of billions in revenue, AWS and Microsoft are both well above the 40% mark and significantly ahead of GCP on both dimensions. VMware, despite its tiny size, is gaining traction, as seen by its public pronouncements.
Alibaba does not have a large sample size in the study, and HPE, Dell, and IBM all have work to do, but they are beginning to exhibit a stronger presence in the poll. However, as compared to the leaders, the expenditure momentum is still lacking.
The major surprise is Oracle. Take a look at where Oracle ranked in the January study and how they’ve risen in previous months.
For its part, Google is fighting to stay current and relevant in the discourse. Because the company’s advertising business is so profitable, it can tolerate the large losses it suffers in the cloud. Don’t anticipate Google to abandon cloud, as some have predicted. That would be a major error because the market is broad enough to accommodate three players.
This leads us to the rest of the group. The cloud ecosystem in general, and AWS in particular, is exploding. The concept of a supercloud – a value layer that spans many clouds and masks the underlying complexity – is beginning to gain traction.
Legacy companies are retaining their customers and fighting to keep them spending — and it’s working. Dell, HPE, Cisco Systems Inc., and smaller, mostly on-premises businesses like Pure Storage Inc. are still doing well. They’re just not as enticing as the major cloud providers. The real action is taking place in the ecosystem of companies within industries that are changing to become digital enterprises. Almost all of them are using the public cloud for a portion of their services, but they’re still connecting to on-premises workloads and data. Making it work and providing a fantastic experience in all environments is a huge opportunity, and we’re seeing it unfold right in front of our eyes.