Latest quarterly results for cloud market leaders show cloud services are, will remain, growth
The big cloud companies keep getting bigger, particularly the market leaders. Amazon Web Services, the world’s top cloud provider, said it grew 45 percent in the last quarter of 2018. In the same period, Microsoft Azure, the No. 2 cloud provider, posted 79 percent growth.
The Lowdown: In a week full of mixed earnings reports, Amazon’s and Microsoft’s cloud service numbers stood out as the bright spots. Both companies, which are fighting for dominance in the cloud era, are flexing their muscle by getting more companies to buy their public and hybrid cloud solutions, as well as attached applications, infrastructure, and support services.
The Details: AWS posted revenue of $7.43 billion in the last three months of 2018, up from $5.11 billion from the same period the previous year. Most of the AWS growth came from its infrastructure services.
In an apples-to-apples comparison, AWS is substantially larger than Microsoft Azure in terms of revenue generation. While Microsoft doesn’t publish Azure revenue, analysts estimate the cloud unit generated $2.85 billion in the last quarter of 2018. However, quarterly sales jumped 74 percent — a substantially faster rate than Amazon.
The Impact: The latest earnings reports
Background: The interesting part of the Amazon and Microsoft cloud battle is the diversity of their portfolios. While AWS is bigger than Microsoft, Microsoft has more weapons in the cloud fight and is using them to attract more customers.
The Microsoft cloud portfolio includes a number of legacy and cloud-focused applications and services, including Dynamics 365, Office 365, and LinkedIn professional networking services. In total, Microsoft generates more than $9 billion from its Commercial Cloud unit.
Conversely, AWS is still primarily a cloud infrastructure company, but it’s pushing deeper into the enterprise software and service segments. AWS recently announced its Outpost hybrid cloud appliance-managed service offering with VMware. And AWS is offering more data protection, migration, and analytics applications and services.
The biggest differentiator between AWS and Microsoft is their respective channels.
AWS engages partners that complement its cloud services. Partners provide the add-on managed services or the pre- and post-sales professional services. AWS is pushing more partners as influencers and resellers through new initiatives, such as its Marketplace Consulting Partner Private program.
Conversely, Microsoft sells its products — including cloud services — either through or with channel partners. Microsoft credits channel partners for gaining access to markets and customers that it couldn’t reach independently. While Microsoft maintains that it’s a channel-first vendor, it’s shifting some cloud sales direct.
Channelnomics Point of View: Cloud computing is like gravity, pulling and attracting the major bodies of the technology universe. The message to partners: Find a way to get into cloud vendors’ orbits. The opportunity for partners is in managed and professional services, as more cloud vendors are finding that selling through channels is less advantageous than selling direct. However, customers are seeking service providers that can help them select, deploy, and manage their cloud instances.