AWS is particularly fortunate to have the cloud success

Boom. Boom. If I had to sum it up, I would simply write “there is an enormous amount of money being invested in cloud computing.” Or I might point to Jordan Novet’s fantastic chart that …

Boom. Boom. If I had to sum it up, I would simply write “there is an enormous amount of money being invested in cloud computing.” Or I might point to Jordan Novet’s fantastic chart that shows the relative growth rates for the top cloud vendors over time. Some may think that all this cloud money is bad for AWS, since the cloud leader once again has real competition.

Bigger and better

Let’s start with the numbers. We can come as close as possible to the numbers, since only AWS clearly breaks down its revenue. This is not true, to be honest. Although Microsoft and Google muddy cloud revenue with Google Apps and Office 365 revenues, AWS also includes such revenue within its overall number… but has comparatively less to muddy it with. It’s not really Microsoft’s and Google’s fault that they have significant other sources of cloud revenue, though it arguably is their fault that they delayed investing in infrastructure-as-a-service, given AWS several years to build up momentum.

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The numbers are staggering. They’re big.

AWS generated $18.4 Billion in quarterly revenue (growing 37%) and represents a $74 Billion run-rate. Microsoft’s Intelligent Cloud segment, including Azure, SQL Server and Windows Server, generated $19.05 billion in revenues. Azure grew 46%, but there is no run-rate information because Microsoft doesn’t separate Azure. Some cloud services aren’t all cloud, such as Windows Server …);.

Google Cloud, which also includes Google Workspace, earned $5.82 Billion in cloud revenue. This represents a 44% increase and a $23 Billion run-rate.

AWS doesn’t give much information in earnings calls. However, it did report that it spent approximately $24 billion on capital expenditures “primarily”. (Think: data centers). Charles Fitzgerald monitors the cloud’s CapEx spend. Let’s just say that each of the three major players is spending “a lot.” AWS also reported a 66% increase in long-term contracts for AWS, which netted an $88.9 million balance. Satya Nadella, Microsoft CEO, was pleased to announce that Azure deals worth $100 million had increased by two-thirds in the quarter. This could be a sign that there was one deal, but there are now two. Or it could simply mean that there were ten and there were twenty. We were not given any details. Google didn’t offer much detail about its cloud earnings this time. All around, big numbers and huge amounts of cash are spent to keep the cash coming in.

In 2019, I stated that we should not be focusing on the past or cloud revenue today. The public cloud still represents a small percentage of IT spending, at 6%. Yes, it’s growing and fast. However, the majority of IT spending is still rooted in private data centres. Everything is supposed to be in the cloud. It’s still on Terra firma, however.

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What is a market for one?

Although it was great for AWS to be ahead in the cloud market, it’s not a good idea to have a market of one. It’s not appealing to customers, and it’s certainly not interesting to the vendor.

Once AWS was sold to early adopters, it took a lot of work to bring mainstream businesses into the cloud. AWS was able to attract these customers with great success, but guess who has more credibility? Microsoft. Piper Jaffray’s survey and others suggest that Microsoft was historically the “most important” or indispensable enterprise vendor to CIOs. Although I don’t have any data from 2016, I would guess that AWS has steadily gained in CIO esteem. However, it is true that Microsoft’s introduction of Azure helped many IT executives overcome their cloud fears.

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Google is a relatively new company that helps IT executives imagine new frontiers in data science, and other areas. Although Google isn’t the only cloud that can produce great machine learning/artificial Intelligence/data science services but Google is the only one to open-source its top technology to set industry standards, as Alex Engler, a Brookings Institute fellow, has said. Some of my AWS colleagues might argue that AWS services are better in this or another way. But that’s not what matters. To win more businesses, it’s better for a community to pitch new and innovative business approaches, rather than just one.

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Andy Jassy, then AWS CEO and current Amazon CEO, recalled in 2017 that “I don’t think in our wildest nightmares we ever thought we’d have a 6- to 7-year headstart” in cloud. This head start and the existing lead almost certainly felt good. AWS needed to be customer-focused in order to have competitors that could help it grow and improve its market share. This is what we have now and it’s just as great for AWS than it is for Microsoft and Google and Alibaba.