AWS, Amazon’s cloud computing division, is getting larger and larger. When compared with Google, Microsoft, IBM and Salesforce, AWS outpaced all of the four competitors, combined. The largest internet-based retailer released its first quarter results on April 24th, 2015, and it's concluded that AWS is a growing giant among giants in the cloud business.
AWS's market share in the market rose to 29 percent in the first quarter of 2015. One of its competitors, Microsoft gained twice the size of Google. Salesforce came fifth.
Microsoft is trailing close to AWS with its Azure cloud platform, and has the highest revenue growth rate. While IBM continues to dominate the private and hybrid cloud services.
Despite AWS is going straight up as number one in 2015's first quarter, all are able to claim leadership because all of them move in different part of the cloud market. AWS however, can claim itself to be ahead in the overall cloud infrastructure business because its cloud market is growing at a much faster rate than SaaS or infrastructure hardware and software.
Amazon announced that its AWS division took in first 2015's quarter revenues of $1.57 billion, or up from $1.05 billion in 2014.
"Amazon Web Services is a $5 billion business and still growing fast - in fact it's accelerating," said Amazon CEO Jeff Bezos in a statement.
One competitor that has the power to argue is IBM. The Big Blue highlights that the two companies are operating in different market. IBM said that the cloud market is splitting between low-end, low-margin cloud offerings in the public cloud space, and the higher-value, higher profit cloud services.
"IBM is successfully targeting that high value cloud space," said a spokesperson of the company.
Despite the company's announcement that revenues $19.9 billion in the first quarter of 2015, a 12 percent fall year-over-year, IBM's CFO Martin Schroeter said that it's the company's cloud performance figures which show IBM's progress in the market.
"Our cloud revenue was up over 75 percent year to year. On a trailing twelve month basis, our cloud revenue was $7.7 billion. This is a demonstration of high growth in the higher-value cloud opportunities across public, private and hybrid. We had terrific performance in our cloud foundational and as-a-Service offerings. And we exited the quarter with an annual as-a-Service run rate of $3.8 billion, that's up a billion and a half in the last year," explained Schroeter.
Both Amazon and IBM run in different market, so their announcement can't be compared directly. But what makes it clear is that, the cloud business is a huge gain, and much like the PC business back in 90s when Microsoft has had an upper hand, most of the value will be in software and services, not hardware.
Hardware and Software to Form the Cloud
Amazon Web Services was officially launched in 2006. Few years before that, Chris Pinkham and Benjamin Black presented a paper describing the vision to Jeff Bezos, who apparently liked the idea a lot. Less than a decade later, AWS has over 1 million customers ranging from businesses like Netflix and Expedia, to Healthcare.gov, CIA and companies that people have never heard of.
What made AWS big was its strategy in giving a low cost and low margin service. But acting as a double-edged sword, the low margin has made its competitors gain a fast pace. IBM and others are outpacing AWS by their higher value service, and they did outperform it.
And as the leader among the AWS competitors, IBM is the one that comes first in outperforming AWS.
IBM first launched the PC, and it was an almost immediate success. It went far beyond Apple, and became its own new industry. But as technology grows, hardware isn't the end value of the computer age, software is. This is when Microsoft stepped in with its own operating system, and became the world's most powerful technology company. IBM's throne was taken by force.
As the dot-com bubble burst in the year 2000, the internet came into a massive popularity, and the demand shifted. As one of the internet company that survived the Y2K, Amazon launched AWS when the demand of hardware and software was preferred to be "loaned" than "owned". IBM saw this a little late, and this time it is not making the same mistake of focusing on hardware to the exclusion of software
Apparently, Microsoft also had a very similar strategy. When it saw that hardware isn't the highest demand, and software is starting to fade on its side, cloud was an open opportunity for the software giant. Microsoft offered Azure, which reported $6.3 billion in cloud revenues, second to only IBM. But this time, Microsoft is sharing its market with others in the competition, and unlike its history, Microsoft in the cloud is not seeing itself as number one, or at least not yet.