AWS, Azure Lead $35B+ Public Cloud Market

Scott Ferguson
12/21/2017
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As 2017 comes to a close, the market for public cloud services, including IaaS, PaaS and SaaS, continues to grow, with the biggest of the big players -- Amazon Web Services and Microsoft Azure -- leading the charge.

By the end of the third quarter of this year, total infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) revenues had soared past $35 billion, representing about 54% year-over-year growth, according to a new report from financial analyst firm Jefferies.

Software-as-a-service is considered its own category and it totaled $33.5 billion in revenues during the third quarter or 43% year-over-year growth.

Cloudy profits
(Source: ECN)
Cloudy profits
(Source: ECN)

The Jefferies numbers also confirm what has previously been reported: Amazon Web Services Inc. controls the vast majority of the public cloud market -- specifically IaaS and PaaS -- with Microsoft Azure in second place.

The most important factor driving the public market, according to Jefferies, is "disruption of both existing Software and Hardware infrastructure providers," as well as the "increase in spending on infrastructure and application development platforms delivered via a shared services model via external vendors."

In short, these cloud providers have upended the business models of traditional IT vendors and more and more enterprises want services delivered through the cloud to trim costs and be more efficient.

While the Jefferies' outlook does not break any new ground in terms of who the top players are, these numbers do reinforce other reports about the size and scope of the cloud market, and that it continues to grow while being dominated by a group of about seven main suppliers. (See Microsoft Growing Explosively, but Amazon Retains Huge Cloud Lead.)

The Jefferies report finds that AWS generated about $18.3 billion in revenue from IaaS and PaaS services for the quarter -- a 42% year-over-year growth -- that ended on September 30, and that it controls an astonishing 44% of the global market.

Azure, by contrast, collected $6.2 billion in revenues -- 89% growth -- and represents about 15% of the IaaS and PaaS market.

Jefferies also confirmed that Google Cloud is the fastest growing, with revenues of about $2.1 billion during the quarter, with equals out to a 125% year-over-year growth rate. However, the company only represents about 5% of the worldwide market. (See Google Nabs Former Cloud Holdout Etsy.)

The other company that is growing is Alibaba Group Cloud, with a 92% year-over-year growth rate and quarterly revenues of $1.8 billion. It now represents the 4% of the global IaaS and PaaS market, and these numbers reflect other reports about how fast the company is growing. (See Alibaba Cloud Is Surprise Winner in IaaS Sweepstakes.)


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The one outlier in the report is IBM Corp. (NYSE: IBM), which Jefferies ranks third behind AWS and Azure and actually ahead of Google in fourth. The analysis calculates that IBM Cloud had $4 billion in revenue during the quarter -- a 22% increase -- and owns about 10% of the global market. However, the Jefferies analysts note that much of Big Blue's revenue comes primarily from private cloud.

"IBM's IaaS/PaaS revs primarily reflects hosted and managed private cloud and managed cloud services, with only a small percentage attributable to public cloud," according to the report.

Rounding out the top seven are Salesforce.com Inc. , which primarily offers PaaS and SaaS services. The company has revenue of $1.8 billion and grew 44% year-over-year. Oracle Corp. (Nasdaq: ORCL) is the other big player, with IaaS and PaaS revenue of $1.6 billion -- 20% year-over-year increase -- and the company oversees about 4% of the market.

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— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.

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Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
12/26/2017 | 1:21:59 AM
Back to the cloud future
As the year comes to an end, this cloud market update report is particularly interesting. As I was reading, I remembered when back in 2015 analysts’ forecasts talked about how cloud services were going to dominate the future. In that war of the clouds four companies were mentioned for their incredible growth. And in this order they were predicted the leaders to dominate the future of cloud: Amazon, Microsoft Alphabet Google, and Salesforce. That future is today. And we can clearly see the predictions in 2015 were right. IBM and Oracle clouds were young back then.
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
12/26/2017 | 5:22:27 PM
Re: Back to the cloud future
The cloud companies that dominate, as previously predicted, will need to continue to adapt and grow to hold on to their market positions.
danielcawrey
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danielcawrey,
User Rank: Light Sabre
12/27/2017 | 1:24:23 PM
Re: Back to the cloud future
IBM should just focus on the private cloud market. Honestly, I did not realize they were doing $4b a year in cloud business. That's good, but probably needs to be better for such a large company. Keeping focus on private cloud is key if you ask me. 
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
12/27/2017 | 1:27:25 PM
Re: Back to the cloud future
A niche focus can work for some, especially if they are scale-challenged compared to competitiors.
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
12/27/2017 | 6:05:59 PM
Re: Back to the cloud future
No doubt about it. Now it comes a time for consolidation. It will be interesting to see how IBM and Oracle evolve in this coming year and how such evolution is going to affect the cloud market leaders.
maryam@impact
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[email protected],
User Rank: Light Sabre
12/29/2017 | 5:45:20 PM
Re: Back to the cloud future
I do agree that cloud consolidation will come but probably not right now.  We still have a lot of growing and evolving to do in the market before we see a consolidation.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
12/29/2017 | 11:30:28 PM
Re: Back to the cloud future
@Susan: Oracle seems like it's been huffing and puffing to catch up for quite some time now in the cloud market -- and that no matter what exciting offering they come up with next, they have difficulty outdoing their top cloud competitors.

Of course, this line of thought leads to Monday-morning quarterbacking of Larry Ellison's infamous criticisms about cloud evangelism way back when -- but, to be fair, he was speaking more about the idea of slapping a "CLOUD" label on everything.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Light Sabre
12/29/2017 | 11:32:01 PM
Re: Back to the cloud future
@maryam: Yeah, we're moving toward cloud decentralization through multicloud convergence right now. And what consolidation is coming is in the form of private clouds on-prem. A cloud "crash" could be coming absent some real innovations.
maryam@impact
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[email protected],
User Rank: Light Sabre
12/31/2017 | 4:48:45 PM
Re: Back to the cloud future
True but the innovation may come in how the cloud is packaged and sold. Time will tell.
Michelle
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Michelle,
User Rank: Light Sabre
12/31/2017 | 10:09:10 PM
Re: Back to the cloud future
I don't remember reading about Ellison's critism of "clouding all the things". I have a feeling the sentiment holds up after all this time. 

Oracle does seem to be running behind competitors. They have a lot of ground to make up. It all seems impossible to me from the cheap seats.
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