Google, Microsoft Bid For Burgeoning Cloud Market

Amazon may be the largest vendor, but Google and Microsoft are bringing new initiatives into a rapidly growing cloud service marketplace.

Charles Babcock, Editor at Large, Cloud

February 4, 2016

6 Min Read
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Google, Microsoft, and Amazon are taking drastically different approaches to capturing what many observers see as a burgeoning cloud market. Google, with all its search operational expertise, is intent on getting back in the game, and a recent report from TBR says it is doing just that.

Microsoft is bidding to become the leading practitioner of the hybrid cloud model by giving customers the option of establishing its Azure environment, which Redmond operates, on its own premises in conjunction with its public cloud.

Amazon, which has no hybrid cloud offering that matches Microsoft's, is doing what it does best: Continuing to innovate on top of its evolving public cloud platform. But it's not able to match Google's "custom" cloud instances.

By the Numbers

At stake is a market that edges up a little higher each time the market researchers make an estimate. In January, IDC predicted cloud spending would double between 2015 and 2019 to $141 billion, or six times the increase projected for in-house IT budgets.

Given Amazon's head start, Google and Microsoft are intent on growing fast, and their revenue growth rates are actually a step or two ahead of Amazon's. For example, Microsoft said its Azure cloud business grew by 140% in the second quarter 2016, while its online Office 365 grew by 70%.

But how much does that matter if Amazon Web Services business is already eight times larger and growing at a 72% rate through 2015?

Google's cloud business grew 71% in 2015, according to analyst Meaghan McGrath at Technology Business Research. But the percentages are hard to match up with how the companies count their cloud revenues.

IBM and Microsoft have a loaded store shelf when it comes to labeling cloud products. IBM said in 2015 it would have $7.7 billion in cloud revenues, slightly behind Amazon Web Services' $7.9 billion. IBM's number appears to include hosted, managed, and consulting services. AWS only counted its public infrastructure-as-a-service, while IBM threw in a bunch of "cloud-related" software and services.

Likewise, Microsoft CEO Satya Nadella estimated in April 2015 that his firm was on a 12-month run rate of $6.3 billion in cloud revenues, another respectable number, but one that leans on its Office 365 and other online applications sales.

Who Has the Advantage?

Nevertheless, here are a few points on how each vendor is emphasizing its strengths and going after a larger share of the cloud market.

Most interesting is Google Cloud Platform -- the combination of App Engine and Compute Engine -- which, after the restructuring of its Alphabet parent holding company, finds itself closer to the center of operations with fewer distractions around it. McGrath phrased it as a case of having less sibling rivalry to contend with, and more of a chance to occupy the center stage itself. The hiring of Diane Greene, a VMware cofounder and veteran of building startup companies, is likely to increase focus as well, as InformationWeek reported Nov. 20.

It's easy to forget sometimes how much is going on at Google besides cloud computing and search.

As previously reported by InformationWeek, Google search and cloud products accounted "for all but a sliver of Alphabet's revenue, bringing in $74.5 billion for the year, compared to $448 million for 'Other Bets,' a group that includes Calico, Google Capital, Google Fiber, Google Ventures, Google X, Nest, and Verily."

Since Nov. 30, however, the Google Compute Engine has offered the option of "custom" virtual servers that the user configures to his own liking, as opposed to the pre-set features in the Amazon table of instances. The "custom metrics" option is still in beta, but it's likely to find traction among users who tire of searching through Amazon's list of 39 instances in order to figure out the right one for their task. 

Google's "infrastructure and platform services continue to build a customer base as enterprises look for easy to use and price effective cloud services," wrote McGrath in a Feb. 1 TBR research note. The custom machine types Google is now offering "will be a strong selling point for Google Cloud Platform in 2016, as they remove the need to select a pre-defined instance size that may exceed requirements… "

Microsoft meanwhile is a key contender, along with VMware, to supply like-to-like software stacks for both on-premises purposes and for their respective public clouds. But VMware has had to pull in its horns recently as it announced 800 layoffs and a narrowing of focus for its public vCloud Air service. That's necessary as it and its parent company -- EMC -- prepare to be acquired by Dell.

That leaves Microsoft with a clearer field in which to offer a version of its Azure software stack on-premises as a way of getting to private cloud without going through a painful open source implementation of cloud software.

[Want to learn more about predictions for cloud spending? See Synergy's $110 Billion Spending Report Smashes Other Estimates.]

Not everyone is a believer in this approach.

Cloud Technology Partners' principal David Linthicum, writing Feb. 2, says it's an approach likely to fail. But he bases that assessment on the private cloud being inherently less efficient than a public cloud's economy of scale across many users. He doesn't see anything wrong in the Microsoft software itself.

That means that many IT shops, already familiar with Windows Server and Systems Center operations, are going to adopt the Azure Stack. Instead of being another stack to implement, the Azure Stack is embedded as an extension of Windows Server 2016, using the same APIs and tooling as Azure. Windows Server 2016 is due out later this year.

Which Cloud?

The belief in the need for private cloud persists among many enterprise IT cloud users, for various reasons, despite its inability to match all the public cloud's efficiencies. Maintaining data privacy and specialized security considerations figure into the mix.

If the cloud were one uniform thing, then perhaps Amazon would be running off with the field at this point. But in fact, to different enterprise users, there is still a variety of things they are pursuing to shape their future computing. That pursuit breathes new life into Google's and Microsoft's ongoing participation as providers.

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About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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