Amazon, Microsoft, IBM, Google Capture Cloud Market

Why Cloud Security Beats Your Data Center

Synergy Research says while there is now a broad (and still increasing) number of cloud suppliers, most customers are settling on just four providers: Amazon Web Services, Microsoft, IBM, and Google.

Together, those four now represent 54% of the total cloud market, up from 46% in mid-2014 and 41% in mid-2013. Synergy defines the cloud market to include infrastructure-as-a-service, platform-as-a-service, and public/private hybrid cloud services. With such a broad definition, it says that $6 billion is spent on cloud services each quarter, and that $20 billion was spent over the last 12 months.

In cloud services, scalability and global reach are key driving factors as companies select a service provider. Cloud providers have raced against each other to build out data centers that maximize proximity of service to the largest number of customers. The companies often boast of centers on different continents. Not everyone can compete at that scale.

[Is Amazon.com really bigger than Wal-Mart? See Amazon's Profitable Q2: Is It Bigger Than Wal-Mart?]

"The cloud infrastructure services market is quite clearly bifurcating with a widening gap between the big four cloud providers and the rest of the service provider community," said John Dinsdale, chief analyst and research director at Synergy Research Group, in a July 24 announcement about its Q2 cloud market research.

 "Developing the necessary global hyperscale data center infrastructure along with the required marketing and operations support is simply beyond the reach of all but a very small number of players. This is not going to change," he added in the announcement.

In a follow-up interview, Dinsdale said there may be four large providers, but Amazon overshadows the other three. Of the 54% share of the market that they hold, Amazon represents 29%; Microsoft, 12%; IBM, 7%; and Google, 6%. So Microsoft, IBM, and Google combine for 25% of the market, compared to Amazon's 29%.

Another important fact is that Microsoft and Google are the two suppliers growing at the fastest rate. Synergy's Q1 report, released in April, concluded that Microsoft was growing at a rate of 96% a year, and Google at a rate of 74%. IBM also weighed in with 54% growth, compared to Amazon's 49%. The market as a whole, however, was growing at a rate of 33%. The big four, with their accelerated rates, are growing faster than the market, and must be taking marketshare from smaller suppliers.

Figure 1:

(Image: iprostocks/iStockphoto)

A deeper look at the Q2 data indicates that each provider has different strengths among the types of cloud services. Amazon's core strength lies in IaaS, and in that category it leads by an even wider margin than its 29% marketshare would indicate. Microsoft's Azure service started out as a PaaS. Dinsdale said its revenues are split between PaaS and IaaS.

Likewise, Google's cloud service started out as App Engine, a PaaS that mimicked Google's preferred Python infrastructure. But it's since branched out into a broader offering of IaaS. Dinsdale said in an email response to InformationWeek that Google's strength is split, like Microsoft's, between PaaS and IaaS.

IBM, on the other hand, has concentrated on building private clouds among its established customer base and on architecting those clouds to work in a hybrid fashion with its public cloud services. IBM "gets the majority of its revenue from private/hybrid services," Dinsdale wrote, with the remainder coming from a mix of its IBM SoftLayer public cloud services and its Bluemix PaaS service.

But even for Amazon, PaaS has become a significant revenue generator, he added. Amazon doesn't offer tools and software development systems directly, but it frequently serves as a host for those provided by third parties. Active State's Stackato service is based on Amazon. The big open source PaaS project, Cloud Foundry, has an implementation on Amazon, as does Red Hat's OpenShift. Salesforce's Heroku service is on Amazon, as is Engine Yard.

AWS "has a very substantial PaaS business," noted Dinsdale.

In addition, both Microsoft and Amazon are active in building out hybrid cloud services for some of their customers, he said.

In Synergy's April report, it listed Salesforce as the fifth-largest supplier of cloud services, growing at 34%, but its June analysis didn't count software-as-a-service.

(Story continues on page 2)

With AWS, IBM, Microsoft, and Google growing faster than the market, where does that leave regional and smaller suppliers? "The good news for the plethora of small-to-medium-sized cloud providers is that there does remain a wealth of opportunity for those that are focused on specific market niches or local geographic areas," Dinsdale wrote.

That's faintly reassuring to VMware, which aspires to be a major public cloud service provider, but is still not making it into the top five or even the top ten rankings. Dinsdale said it can be found in the top 20 suppliers, but VMware finds most of its cloud revenues "in selling technology used to build clouds, rather than in selling infrastructure services to cloud users."

That leaves developer-focused suppliers, such as Linode, Atlantic.net, and Digital Ocean with room to grow, but situated in a difficult position when it comes to graduating to the front ranks of cloud suppliers. Amazon, Microsoft, Google, and IBM keep expanding the depth and breadth of infrastructure services that they're offering to enterprises while expanding their chains of data centers. One reason IBM acquired Softlayer in 2013 was that the young company had the foresight to link its data centers on a high-speed fiber-optic network, which meant its cloud users could easily tap an alternative site for backup or disaster recovery.

An Atlantic.net or Digital Ocean can provide lots of solid-state-disk-based service and a quick launch of instances, "but cannot hope to get anywhere near the scope and scale of the big four," Dinsdale noted in his email.

The cloud market continues to reshape itself as the pace of usage quickens. It's not enough to provide self-provisioning systems from a cluster of servers on the Internet and proclaim yourself a new cloud supplier. Customer instances need a set of surrounding services, including load balancing, elastic scaling, development services, monitoring, self-healing, and high availability, and they need them in multiple locations around the world. Timid and undercapitalized providers need not apply.