Amazon Web services (AWS) is one of the largest cloud services providers around. However, it is facing fierce competition from Microsoft and closely behind, IBM. As reported by Synergy Research Group (SRG), Amazon’s revenue from cloud services grew by 38% compared to Microsoft’s 164% and IBM’s 86%. Synergy Research Group collated this information from the financial reports of each company for the second quarter of 2014.
SRG notes that the market share of Amazon and Google remains the same despite the total market growing at a rate of 45% over the last year. Yet, the research consultancy firm defines the cloud infrastructure service market as cloud services including IaaS, PaaS and private & hybrid cloud. Therefore, the revenue earned by the top five providers is not necessarily from the same type of services.
Microsoft, IBM & Salesforce
SRG reports that both Microsoft and IBM have reported revenue from cloud services of around $1 billion, mostly from software/SaaS, cloud-related hardware products, or associated professional and technical services. IBM has heavily invested in Softlayer to boost its revenue growth. Microsoft on the other hand, is pushing Azure’s market reach by cutting prices. Although the reported revenue growth from Salesforce was from SaaS, it is focusing now to grow its revenue through its two Platform-as-a-Software (PaaS) offerings, Salesforce1 Platform and Heroku.
Although Amazon reported a general loss due to excess expenditure, it reported a growth in cloud revenue. The year-over-year cloud revenue growth was at 60% in the first quarter of 2014, compared to 38% growth in the second quarter. The overall growth rate for the first half of 2014 was at 49%. In spite of that, it enjoyed 64% growth the previous year. This shows that cloud revenue has dipped irrespective of its huge market share. The research company stated AWS total revenues per quarter now exceeds $1 billion, with majority of that income purely derived from cloud infrastructure services.
Google’s performance is less than impressive considering its market share has remained unchanged over the year. However, Google is still considered a huge factor in the market especially when it comes to setting prices.
AWS’s slow cloud revenue growth could be partly attributed to price wars from Google and Microsoft. Amazon reported they have slashed various cloud services prices from 28-51%. In March, Google lowered its IaaS and PaaS prices that sparked a price cut reaction from both AWS and Microsoft. Google reduced its cloud services prices by as much as 85% on some services. AWS lowered its prices in response, and Microsoft swiftly lowered the prices of Azure.
While all these competition is healthy, John Dinsdale, a Chief Analyst and Research Director at Synergy Research Group observed that Amazon is yet to lose grip of this fast growing industry. While announcing the analysis report, he said, “It has become clear that AWS finally has some tough competition to face. Until this quarter, it could claim that it was bigger than its four nearest competitors, but now at least one jewel has fallen from its crown. While it remains a formidable leader of the market, Microsoft is making some huge strides in IaaS and PaaS while IBM now has clear leadership in the private & hybrid infrastructure services segment.”
After most companies released their second quarter financial reports, Synergy Research Group predicts that the cloud industry earned a total quarterly revenue of $3.7 billion, with an expected annual revenue in excess of $13 billion. Microsoft surpassed Amazon in cloud revenue growth, to lead the pack at 164%. IBM was second with 86% growth. AWS came third with 49% growth. Google followed closely behind at 47% while Salesforce rounded the top five providers, with 38% growth.