With an estimated market value of $14.4 billion for 2017’s third quarter, here is how the cloud computing is making a difference and becoming a phenomenon that is driving business growth.
With the majority of big U.S. tech companies, including Alphabet’s Google, Amazon, Microsoft and Intel, sinking in big money in the cloud computing business, the industry is seeing a massive boom.
Significantly, all of the above mentioned companies have posted stellar quarterly earnings on the strength of their data centers and cloud business.
Case in point: Microsoft’s Azure cloud business is seeing a year-on-year growth of 90%. Although Microsoft does not provide a break-up of its revenue figures for Azure, as per Canalys, a research firm, it is likely to be $2 billion.
“The move to the cloud was one we felt Microsoft could always benefit from, and they’re showing us that they can,” said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.
Underscoring the cloud computing boom in Microsoft’s case was its eagerness to secure Costco, a retailer, as an Azure customer.
Similarly, Amazon Web Service is also seeing a phenomenal growth.
“Spinning off AWS at some point down the road might become necessary to prevent an exodus of customers,” said Tim Green, an analyst with the Motley Fool.
AWS is currently the leader in revenues in the cloud computing business, by revenue. For the last quarter, AWS has raked in nearly $4.6 billion, marking a year-over-year increase of 42%.
While Microsoft may have beaten Amazon with the Costco deal, Amazon however has scored big with other customers, including Hulu, Toyota Racing Development, and most notably, General Electric.
Alphabet’s Google Cloud Platform has also been busy getting deals with the likes of Kohl and payments processor Paypal. Like its peers, Alphabet does not provide break-up of its revenues for Google Cloud Platform; however as per Canalys estimates, the business is likely to have generated $870 million in the last quarter, up by 76% on a year-over-year basis.
As per Google’s CEO, Sundar Pichai, the Google Cloud Platform is a top-three priority for the company. He also mentioned that Google plans on continuing the expansion of its cloud sales force.
As per Canalys’ estimate, the cloud computing market for 2017’s third quarter is at $14.4 billion, up by 43% from a year earlier. As per its estimate, Amazon holds the top position with a market share of 31.8%, followed by Microsoft at 13.9% and Google with 6%.
As per Daniel Liu, a research analyst with Canalys, the “cloud market will keep growing faster than most of the traditional information technology segment, as the market is still in the developing stage”.
Interestingly, retailers are distributing their cloud strategy across cloud vendors: Target Corp and Home Depot Inc have said they use a combination of cloud providers.
“Our philosophy here is to be cloud agnostic, as much as we can,” said Stephen Holmes, Home Depot’s spokesman, while adding that the company uses both Azure and Google Cloud Platform.
However a few analysts believe that the cloud market is likely to shrink in the near future.
“Going forward, cloud services will become more of a commodity, and the prices will quickly compress,” said Adam Sarhan, CEO of 50 Park Investments, an investment advisory service. “For now though, it’s a great business with plenty of room for all to grow.”