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Microsoft, IBM Surge Ahead of Amazon In Cloud Revenue Growth, Analysts Say

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Cloud computing may be a disruptive force, but two of the leading establishment vendors appear to be surging ahead in the market for online infrastructure services. Its also become a highly lucrative space, now worth more than $13 billion a year.

Data just released by Synergy Research Group shows that Microsoft and IBM are leading the growth in cloud infrastructure services as of the second quarter this year.

The total cloud infrastructure services market grew at a pace exceeding 45%, Synergy reports. With most of the major operators having now released their earnings data for Q2, Synergy estimates that quarterly cloud infrastructure service revenues (including IaaS, PaaS and private and hybrid cloud) have reached $3.7 billion, with trailing twelve-month revenues exceeding $13 billion.

Microsoft and IBM have gained market share over the last four quarters, while the share of Amazon Web Services (AWS) and Google is unchanged from a year ago, the consultancy reports.

Forbes contributor George Anders provides an extremely insightful look at Amazon's challenge in this space, particularly with a resurgent Microsoft aggressively promoting its Azure platform. "In a battle against Microsoft — whose Redmond, Wash., headquarters are just 12 miles away from Amazon’s downtown Seattle hub — Amazon is playing the short stack," he states. "Peek at Microsoft’s balance sheet, and you’ll see $85 billion of cash and short-term investments."

At the same time, IBM has been aggressively moving forward with its SoftLayer offerings, along with 40 cloud centers across the globe. Since its $2 billion acquisition of SoftLayer a year ago, IBM has poured $1 billion in a new Watson business unit, with Watson running on SoftLayer, and another $1 billion to establish a cloud PaaS to help millions of developers build cloud applications running on SoftLayer, with work based on the Cloud Foundry Foundation.

Leading vendors' revenues are neck in neck, Total Amazon AWS revenues are now well in excess of $1 billion per quarter, with nearly all of that coming from cloud infrastructure services. IBM and Microsoft also both claim quarterly cloud revenues of around $1 billion, but in their cases much of the cloud revenue comes from software/SaaS, cloud-related hardware products or associated professional and technical services.

Synergy observes AWS did not grow its cloud revenues on a sequential basis, and consequently saw its at year-on-year growth rate drop to 49%, Synergy adds. At the same time, the consultancy adds, Google is not managing to keep pace with its larger rivals in this space.

Growth for leading cloud infrastructure providers in Q2 was as follows:

  1. Microsoft  164%
  2. IBM  86%
  3. Amazon Web Services  49%
  4. Google  47%
  5. Salesforce  38%

As Synergy analyst John Dinsdale summed it up:

“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 and hybrid infrastructure services segment.”

One thing is clear: there's a great deal of competition heating up in the cloud infrastructure space. And this doesn't account for open-source offerings such as OpenStack and Eucalyptus, which pay roles in private and hybrid cloud projects that usually don't get counted in market figures. Competition in this space is a good thing for everyone, and let's hope it remains extremely competitive -- we already saw the benefit in the price wars earlier this year. Most importantly, it really doesn't matter whether this vendor or that vendor is making gobs of money. That's only a sideshow. It's about what cloud can do for businesses and innovation, and helping people succeed in a fast-paced economy.