How AWS is Winning the War for Cloud Computing Market Share

Amazon, Alphabet Inc. (Google’s parent company) and Microsoft all posted first-quarter earnings on Thursday, April 27, and each made sure to highlight its massive growth in the cloud computing market. As the war for cloud-computing market share wages, earnings reports for these three industry-dominant vendors continue to put a greater emphasis on profits from their cloud segments.

Amazon announced that its cloud sales increased 42 percent. Alphabet does not segment out its cloud computing venture, however the area of “other revenues,” where its cloud products fall, grew 49 percent. And not to be outdone, Azure, Microsoft’s competing cloud, had revenue growth of 93 percent this quarter.

Despite the lowest growth numbers of the three, Amazon Web Services (AWS) still has a hold on the cloud computing sector, but competitors are nipping at its heels and eager to compete in the space. However, “In the fourth quarter [2016], Amazon accounted for 40 percent of the worldwide market for public cloud services, compared with 11 percent for Microsoft and 6 percent for Google, which was tied for third place with IBM, according to Synergy Research Group,” via The New York Times.

Selling cloud computing and infrastructure to companies is extremely lucrative. Because these massive enterprises have already built themselves huge data centers to host all their own computing, the overhead is essentially nil, making margins enormous. This makes it easy to highlight in an earnings report, encouraging shareholders and giving these companies an “easy win.” Amazon, Alphabet and Microsoft all want the biggest piece of the pie, and the good news for them is that the pie is getting bigger every day.

How Amazon Became the Market Leader

Amazon was the first of the three to realize the profitability of hosted cloud computing. This gave the company a significant head start on any competition. However, this is not the only reason for its dominance. The high performance rates and speed at which users can deploy AWS tools makes it desirable to small businesses and enterprise companies alike.

According to G2 Crowd’s Infrastructure as a Service (IaaS) data, Amazon’s infrastructure product S3 is ahead of both Azure and Google Compute Engine in a few important areas. Amazon S3 leads its two main competitors in both “quality of support” and “ease of doing business with,” according to G2 Crowd user reviews*. One could infer that these advantages are due to Amazon’s e-commerce upbringing, a space in which customer experience and support is of the utmost importance.

Average User Satisfaction Rating

AWS S3
Quality of Support
80%
Ease of Doing Business With
86%
Azure
Quality of Support
77%
Ease of Doing Business With
79%
Compute Engine
Quality of Support
68%
Ease of Doing Business With
71%

*All data from verified user reviews as of April 27, 2017.

However, what really sticks out in the reviewer data is the time it took for reviewers’ companies to go live with each product. For Amazon S3, 72 percent of user responses noted that it took less than one month to push the product live, and 38 percent said it took less than one day. While that’s the beauty of hosted infrastructure, less than one day for implementation is remarkable for any product, let alone complex infrastructure. While this may not be the only reason for Amazon’s success, it is certainly helpful and a major win versus its competition.

User Implementation Time Breakdown
AWS S3
Less than 1 Month
72%
Less than 1 Day
38%
Azure
Less than 1 Month
45%
Less than 1 Day
25%
Compute Engine
Less than 1 Month
54%
Less than 1 Day
27%

Can AWS Stay Ahead?

While AWS still showed a significant increase in sales, its growth actually slowed. As these three goliaths compete, there are inevitable pricing slashes to try and gain an edge, which may have contributed to the decreases, but that’s a part of the war. Amazon knows how to take on industry staples, having been a terror for brick-and-mortar retailers for a number of years now, but both Alphabet and Microsoft are very confident in their respective products.

At the Forbes CIO Summit earlier this week, Google boasted heavily about its cloud infrastructure product and future growth.

“I think we have a pretty good shot at being No. 1 in five years,” senior vice president Diane Greene said. “I actually think we have a huge advantage in our data centers, in our infrastructure, availability, security and how we automate things. We just haven’t packaged it up perfectly yet.”

The company is so confident in its product that it believes one day its cloud offering will surpass its enormous advertising business. Microsoft is not going to roll over either, and the war will rage on.

As CNBC notes, investors are optimistic that artificial intelligence updates to AWS products will continue to drive growth for the Amazon branch, but that is a space in which its competitors are also very comfortable. It will be interesting to see going forward how the cloud computing market takes shape as the great cloud migration continues.

Will AWS be able to keep its hold on the cloud computing market, or will other players in the space win the war?

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