Blog 4: Cloud Wars; AWS, Azure, GCP

“Digital transformation” has been a buzzword over the last few years, with small and medium businesses as well as large enterprises moving operations to the cloud and adopting online productivity and collaboration services.” – Forbes

One of last week’s readings was a GCP article surrounding the adoption of cloud services, in particular Google’s Cloud services, to businesses in order to adapt to a changing environment due to the COVID-19 Pandemic. We have discussed AWS and have touched on its impact on Amazon. We haven’t talked at all about Azure, but they’re in there too, we don’t talk a lot about Microsoft in our class at all come to think about it. In this blog, I want to talk about the Cloud Wars and highlight the massive impact cloud computing is having on our economy.

Cloud Computing

To start, what is cloud computing? We have covered cloud computing a bit throughout the class, but just to put us on the same page for this blog, cloud computing is the delivery of computing services over the internet (aka the “cloud”). Examples of computing services could be hosting servers, storage, databases, analytics, or intelligence, plus a lot more. You may use iCloud, OneDrive, Google Drive, or DropBox…these are examples of cloud storage. You can access your files anywhere, at any time, on almost any internet-connected device, provided you have access to the internet. You can think of the internet connecting the front-end user interface (using a client device, browser, or software application) and the back end (databases, servers, computers).

To get a bit more technical, cloud computing can be broken down into three realms (although more XaaS versions seem to be added daily).

Platform-as-a-Service(PaaS) – A service in which a third-party provider hosts application development, platforms, and tools on its own infrastructure, available to customers over the internet. PaaS is great for modern business as it helps businesses be fast-paced and agile. Companies can rapidly build customized solutions with the help of a Platform’s advanced tools. As opposed to coding every piece of software from the ground up, PaaS providers often have pre-built blocks that developers can plug and play to build applications quickly.

Infrastructure-as-a-Service (IaaS) – IaaS providers host servers, storage, and other individualized resources over the internet. IaaS gives companies the ability to use a provider’s computing power and storage as opposed to investing in their “on-premise” storage and computers. So as opposed to investing money into servers that will be stored in the server closet (taking up space), a start-up could instead use an IaaS provider and access the storage and computing power remotely. A benefit is that most IaaS providers offer a pay-as-you-use model in which you only pay for what you use. Instead of your on-premise servers needing constant cooling, electricity, and maintenance at all hours of the day, IaaS relieves that burden and gives companies the ability to scale up or down in seconds, depending on their needs.

Software-as-a-Service (SaaS) – SaaS is a way to offer applications and tools over the internet. Instead of a company or even individual installing and maintaining software, one simply accesses the software via the internet, freeing the need to understand hardware management. SaaS is also known as web-based software or on-demand software. Goode Workspace, Microsoft Office 365, or Salesforce are all examples of SaaS.

Overall, all cloud providers have a similar goal; to provide easy, scalable access to resources and services. Benefits of cloud computing include:

  • Cost: elimiates the capital expense of buying hardware and software and seeting up and running a datacenter
  • Scalability: Scale elastically – meaning deliver the right amount of resource when it’s needed, right away, from the right geographic location.
  • Performance: Cloud providers are generally the biggest and most advanced tech companies and offer security, regularly upgraded software, and fast, efficient computing.
  • Security: Cloud providers offer a wide array of very secure security postuers, helping protect data, apps, and infrastructure from potential threats.
  • Speed: Easily provision more resources when needed, but only pay for when you need those resources.
  • Productivity: Cloud computing removes the need for many of these tasks, so IT teams can spend time on achieving more important business goals.
  • Reliability: Cloud Service Proviers make data backup, disaster recovery, and business continuity easier and less expensive because CSPs can mirror data at multiple redundant geographic sites across their network. This would be terribly difficult for a small company to achieve at the scale CSPs can.

The Big Three:

There are a lot of Cloud Service Providers in action today, but there are three US-based Cloud Service Providers that offer a vast array of services to their clients. According to cloudwars.co, Microsoft, Amazon, and Google are the top three most influential Cloud Services Providers. Others on their top list include IBM, Salesforce, SAP, Oracle, and others.

Based on market share, AWS dominates the market with 37%, followed by Azure with 23%, and GCP with 9%.

GCP (Google Cloud Platform)

Arguably the hottest major cloud-computing provider, GCP has climbed the ranks of the Cloud Computing companies over the past few years. Google’s most recent quarterly earnings call (Q3, 2021) reported $4.99 billion in revenue generation from GCP, up from $3.4 billion a year ago. GCP was founded in 2008 and was not focused on commercial operations until 2015. In 2019, Thomas Kurian became the CEO of GCP and triggered the company’s rise to prominence in the CSP space. GCP has only really been operating for about two years and has seen a significant uptick in its cloud market share.

Google has chosen to focus heavily on AI/ML, security, and providing industry-specific solutions to client-specific verticals…which continues to be a differentiation when choosing a cloud service provider.

Azure (Microsoft)

Sizing Azure correctly is a bit difficult based on how Microsoft reports its Intelligent Cloud. Azure makes up a portion of Intelligent Cloud but does not tell how much. However, just like GCP and AWS, CEO Satya Nadella sees Microsoft’s cloud growth as fundamental to Microsoft’s success. Revenues for Microsoft’s Intelligent Cloud were $16.9B for their Q4 ending 10/26/2021.

Azure offers all three layers to cloud computing – PaaS, IaaS, and SaaS and thus are able to offer more options to their customers. Azure’s product line contains virtual machines, AI and machine learning services, virtual network infrastructure, blockchain services, container instances, databases, DevOps pipelines, IoT infrastructure, user and group identity services, developer tools, and storage solutions – among others.

AWS (Amazon Web Services)

Founded in 2006, Amazon Web Services was created as parent company Amazon learned that the massive IT infrastructure it required around holidays and other peak shopping times was vastly underutilized for most of the year. So AWS was formed to offer that untapped compute, storage, and networking expertise and capability to other companies. Definitely the category creator and reigning king in public-cloud infrastructure, AWS has built a vast range of cloud-computing services all across the infrastructure and platform categories. Its early successes, its relentless commitment to ongoing innovation, its long-held practice of regularly lowering prices, and its parent company’s worldwide renown have all combined to make AWS one of the world’s best-known and most-successful cloud-computing companies.

Amazon Web Services become a clear market leader in 2021. And as per the reports by parkmycloud, AWS (Amazon Web Services) generated a revenue of $13.5 billion for Q1 2021. AWS revenue grew 32% in the quarter, accelerating from 28% growth in the fourth quarter.

A Comparison

Extracting the precise numbers of Google Cloud and AWS from Google and Amazon’s quarterly reports was pretty straightforward. Microsoft groups a lot of tools into their intelligent cloud, so not all numbers for Microsoft can be directly compared to the other two companies. The graph below shows Revenue vs Operating Income for each Cloud Service Provider as well as their other sources of income. For example, you can see Amazon makes a lot of revenue via Amazon Retail, but because their costs associated with retail are so high, they actually lose money (at least in Q3 of 2021). When you look at AWS, you can see that literally, the only way Amazon makes money is via AWS. On the other hand, Google loses money on GCP, but they make a lot of money via search and advertising.

Revenue vs Operating Income for Google (GCP), Amazon (AWS), and Microsoft (Intelligent Cloud) for Q3, 2021 (Google and Amazon) Q4 for Microsoft; Data: company financial statements

Market Share

Even though Microsoft reports earning more from their Intelligent Cloud, we must remember that the Intelligent Cloud is make up of different pieces of Microsoft than only Azure. Azure is the competing product against AWS and GCP. However, we can see that even though Microsoft seems to have more revenue generated from Cloud, market share says something else:

2020 Cloud Computing Market Share by Cloud Service Provider; Data: parkmycloud.com

Conculsion

The cloud market as a whole is bigger than ever. Gartner has predicted worldwide public cloud spending to grow 18% in 2021, with 70% of organizations using the cloud in the wake of COVID-19. We can see that AWS has a clear advantage in the market currently. GCP has made tremendous growth and has been named the hottest cloud in the market by cloudwars.com. Still though, Amazon’s first-mover advantage has proven difficult to surmount. Jeff Besos said previously, “AWS had the unusual advantage of a seven-year head start before facing like-minded competition. As a result, the AWS services are by far the most evolved and most functionality-rich.”

Our anecdotal experience talking to cloud customers often finds that true. It seems clear that in the case of AWS vs Azure vs Google Cloud market share – AWS still has a substantial lead, and their market share remains steady. With that said, all players are pushing growth and innovation and driving public cloud adoption across the board. It will be interesting to see if any startups like Snowflake or Firebolt can achieve the same success as the big three or if we’ll see acquisitions from Amazon. The conglomerate is not shy of acquiring companies to put into the Amazon family, but we have not seen that play nearly as prevalent in their cloud space as in their retail space.

One thing is for certain though, Covid-19 has expedited the cloud market in ways that could not have been imagined. Gartner released in April that they believe the public cloud end-user spending will grow 23% in 2021. Even past the pandemic, Cloud will continue to play a pivotal role as company’s continue to enjoy the synergies and efficiencies associated with cloud service provider offerings.

Resources

Cloud Wars Podcats & Webpage

Company Quarterly Reports (AWS, Alphabet, Microsoft)

https://www.parkmycloud.com/

https://www.forbes.com/sites/forbestechcouncil/2021/01/15/how-the-pandemic-has-accelerated-cloud-adoption/?sh=3e5727846621

9 comments

  1. Cloud Brett! Great blog, fantastic title! AWS has revolutionized the world! What a visionary company! I am so excited to see If they will be able to stay relevant and ahead of the competition, but only time will tell. I have a couple of friends that work for the company, and they only have great things to say about it. Also, great job breaking down the industry’s leading players.

  2. Interesting blog, even if its coming from a google cloud shill… — On a serious note, I’m curious to see what the rates of adoption are for IaaS. After many minutes of searching, I could only find statistics of total spend of cloud infrastructure vs on-premise infrastructure. I would think that the majority of back-ends are still on-premise with companies taking a more cloud-first strategy going forward as the on-premise technology is phased out and sunsetted. That’s all to say, it seems like we’re not even close to the peak of these technologies as adoption continues to increase and more companies begin discarding their Server 2008/2012, RHEL 5/6, etc.

  3. Great post, Brett! Thanks, always, for the deep-dive. I am curious about how cloud offers computing offers better security (“Cloud providers offer a wide array of very secure security postuers, helping protect data, apps, and infrastructure from potential threats.”). We’ve spoken a lot in this class about the uptick in ransomware attacks, etc. How is cloud preventing this? I’ve heard of CTOs creating a “lifeboat” — or an entirely disconnected saving system outside of the cloud. Is that not necessary? Seems like it would be a good just in case back-up…

    1. It really comes down to trusting the decades of progress that Microsoft, Amazon, and Google have done to increase their own security postures. If you place a local company’s infrastructure against one of those three company’s, it’s going to be much easier to penetrate the smaller company’s network than one fo the other three. Further, on-premise infrastructures are seldom not backed up appropriately, meaning there aren’t multiple instances of their data far enough apart. If there is a fire in an on-premise data facility, and that data is not backed up, it will likely be completely lost. The benefit of using a cloud service provider is that your data is backed up in multiple different geographies simultaneously, so if there is an earthquake in California where your data sits with GCP, that same data sits in say Michigan in the same form. So CSPs do a much better job protecting data from cyber hacks as well as guaranteeing redundancy.

  4. Excellent post, Brett! It is interesting to see the comparison of the three most prominent players and how their offerings differentiate. Additionally, I appreciated the comparison of the earning of the three companies compared to their cloud counterparts; I had no clue Google was losing money on Cloud as it seems almost counterintuitive. Lastly, the cloud computing market share seems still open to new entrants, and I am interested to see whether the new players will be able to gain market share over the three giants in the coming years.

  5. Thanks for posting this blog, Brett! I actually have never been able to find an intro to cloud computing like you have managed to compile- so thanks and I will definitely be saving this for future use. I think the biggest takeaway for me is that so many more possibilities (and at much lower costs) exists when firms make the jump from physical servers to cloud based operations!

  6. Great introduction to Cloud. Something that I know helps Amazon a lot is their marketplace. When a company signs up on the AWS Marketplace they commit a certain amount of dollars in return for access to solutions that AWS offers on their by partnering with various companies. All AWS is really doing in this case is acting as a facilitator and bringing buyer and seller together and taking a cut of the transaction. So the big cloud players are also competing each other on these marketplace offerings as well.

  7. Thanks for highlighting this, and I agree that it’s surprising how little we have discussed Microsoft throughout the semester – in my opinion, they are proving to become the cloud provider to be reckoned with. Their product offerings and strategic partnerships are growing seemingly by the day, but they also have strong enterprise relationships and are steadily marching towards being able to offer the whole E2E solution including private networks, through their acquisitions of Affirmed and Metaswitch. Google was late to the game but definitely has made up ground and is taking the more unique approach of pushing their ability to offer multi-cloud solutions, which is a good move for them to differentiate. Retailers are understandably skeptical of using AWS so I see that entire sector as a natural fit for Microsoft. Thanks for reminding me of how interested I am in seeing how this unfolds!

  8. Amazing blog, I think you really defined the current situation amazingly well.
    I was surprised by Amazon’s financials, I thought that their main income source was from retail, which is completely wrong. I still see that 40% of the market is not dominated, do you think that these major players will take over?
    Or maybe we’ll see some Blockchain-based solution made of a distributed system of miners?

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