Microsoft Is Winning the ‘Cloud War’ Against Amazon

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Microsoft CEO Satya Nadella.

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Topline: Microsoft is now the most popular cloud services supplier and is steadily gaining market share against major competitors like Amazon, according to a new survey from Goldman Sachs about the current state of a trend that is reshaping the technology industry.

  • Goldman Sachs’ latest biannual IT Spending Survey of chief information officers at large companies, first reported on by CNBC, showed that while Amazon still leads cloud services in terms of overall revenue and spending, Microsoft is the most popular supplier—and is steadily gaining market share.
  • The survey asked technology executives about their vendor choices for public cloud deployments, specifically in two areas: IaaS (infrastructure-as-a-service) and PaaS (platform-as-a-service). By both metrics, Microsoft “demonstrated continued momentum,” beating out Amazon.
  • A larger number of respondents said they currently use Microsoft’s Azure software over that of Amazon Web Services (AWS)—and that lead has been increasing since Goldman’s December 2017 survey.
  • The report also indicates that in three years, more executives expect their companies to be using Azure than any other cloud service—even AWS.
  • While Google and its cloud initiative (GCP) remain a solid third place contender in the cloud wars, Goldman’s analysts found that it saw a slight decline in traction, as fewer respondents indicated that they use the service or will do so in three years.
  • Despite this setback for Google, the analysts point to “more upside” for its cloud business than originally forecast, as Alphabet CEO Sundar Pichai and Cloud CEO Thomas Kurian’s efforts to catch up to Amazon and Microsoft start to bear fruit.

Crucial statistics: The cloud computing wars are just getting started, with plenty of potential market share to still go around: Around 23% of IT workloads are now on public clouds, and that number will reach 43% in three years, according to the Goldman analysts. The booming cloud services market on the whole is likely to balloon to a valuation of up to $1 trillion.

AWS reported $9 billion in revenue last quarter. Microsoft didn’t report specific quarterly revenue for Azure, but one analyst estimated that it was about $4.33 billion, according to CNBC.

Key background: With cloud software proving to be a booming new trend in the tech space, that will lead to even more competition between big players, such as for the $10 billion Pentagon JEDI contract earlier this year, where Microsoft won out on the deal over Amazon. With Azure’s popularity and growing momentum in the cloud services space, Wedbush analysts Daniel Ives and Strecker Backe predict that Microsoft and its CEO Satya Nadella will “win the next stage of the cloud war” against Bezos and Amazon in 2020.

What to watch for: Don’t write Google off as a competitor yet, the Wedbush analysts say. Google Cloud Platform will potentially make a “major strategic acquisition” of another public cloud vendor in its bid to catch Microsoft and Amazon.

Tangent: As Microsoft’s cloud shift starts to pay off further, workplace messaging app Slack will find it increasingly difficult to compete with Microsoft’s Teams initiative and could lose market share, according to Ives and Backe’s forecast.

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