AWS continues to lead the cloud market: Gartner
By Edwin Yapp August 12, 2016
- 2nd place Microsoft improves while Google trails in annual scorecard
- Other cloud players slip into ‘niche quadrant,’ signifying bad times ahead
THERE were no surprises in Gartner Inc’s latest cloud infrastructure-as-a-service (IaaS) scorecard, with three of the biggest names in cloud computing coming out tops again.
The usual suspects – Amazon Web Services Inc (AWS), Microsoft Corp, and Google Inc – continued to lead the field of cloud players in this year’s Magic Quadrant (GMQ) for IaaS, which the research and analyst firm released recently.
This year’s much-cited Magic Quadrant was delayed – it usually comes out before Q2 – which also meant that other analyst firms such as IHS Markit, Synergy Research Group and Forrester Research (subscription required) managed to reveal their findings before Gartner.
Despite the different methodologies and ways of presenting their research, these firms agreed in most areas. The top two players continue to lead the field, with AWS managing to keep nearest challenger Microsoft at arm’s length.
Here, we take a closer look at what these analyst firms are saying about the public cloud infrastructure market.
AWS untouchable, Microsoft improves
Calling AWS a “matured provider,” Gartner said that the Seattle, Washington-based cloud player remains the king as it has a “diverse customer base and the broadest range of use cases, including enterprise and mission-critical applications.”
AWS also has the “largest share of compute capacity in use by paying customers – many times the aggregate size of all other providers in the market,” yet remains agile and innovative, it added.
Having followed AWS closely since 2014, I have to concur: The company continues to make waves by not only being cost competitive but remaining true to its roots of designing and offering industry-leading features.
AWS began life offering public cloud services focused on startups and companies which wanted to rent compute, network and storage from a trustworthy provider in a fuss-free manner. But over the last three years, it has also been actively courting enterprise players.
Initially, there were doubts as to whether it could manage to make the transition into a serious enterprise cloud provider. This was due in part to the fact that it wasn’t revealing cloud revenue and profit numbers – as a fully owned entity of parent Amazon.com Inc, it did not need to.
But that all changed in April 2015 when it began releasing numbers that showed how profitable the business was.
Its second quarter or Q2 2016 earnings also impressed: Sales was up 58% to US$2.89 billion from US$1.82 billion in the same period the previous year.
Synergy Research noted that AWS is almost three times the size of its nearest competitor and it has a clear lead in all major regions and most segments of the market.
Meanwhile, Forrester estimates that AWS’ 2016 revenue is expected to surpass a US$100-billion run rate.
But in its Magic Quadrant report, Gartner noted three points:
- While it is easy to get started with AWS, optimal use requires expertise;
- AWS’ support offerings are tiered based on the level of support that a customer purchases, rather than on a ‘relationship’ or size-of-spend basis; and
- New services are gradually rolled out across regions, so customers outside the United States do not receive innovations as quickly, and global customers may not be able to obtain desired capabilities in all of the regions that they are operate in.
Meanwhile Microsoft has improved its position from the year before and is now a solid No 2 in Gartner’s scorecard in terms of innovation and ability to execute.
Additionally, Forrester estimates that the Redmond, Washington-based giant will, like AWS, surpass the US$10-billion run rate in 2016, although the bulk of those earnings would be bundled with its Software-as-a-Service (SaaS) earnings.
Synergy Research estimates that Microsoft’s worldwide market share has grown 100% from 2015, year-on-year.
Microsoft’s strengths, according to Gartner, lie in its deep roots in engineering innovation and investments, existing customer relationships, good global-class track record, and branding.
Also in its favour was the fact that it could continue to leverage on its enterprise customers and offer them discounts to promote adoption.
Microsoft’s brand, existing customer relationships, history of running global-class consumer Internet properties, deep investments in engineering, and innovative roadmap have enabled it to rapidly attain the status of strategic cloud IaaS provider, Gartner argued.
Microsoft is also aggressively pushing Azure to its customer base, and providing discounts to promote adoption. From a pricing perspective, it remains closely competitive to what AWS is able to offer for basic cloud IaaS for the general public.
Gartner argued that although Azure is neither as feature-rich nor mature as AWS, “many organisations can now consider it ‘good enough,’ and base their vendor decision on factors other than technical capabilities.”
“Microsoft is still in the process of building out its Azure ecosystem,” the analyst firm said.
“It has been aggressively recruiting managed service and professional services partners, but many of these partners lack extensive experience with the Azure platform, which can compromise the quality of the solutions they deliver to customers.
“Many such partners do not take advantage of cloud-native capabilities, reducing the value their customers receive from Azure,” it added.
Whither (wither) Google?
Hard to think of Google playing catch-up in anything, but the No 3 cloud provider and its Google Compute Platform (GCP) was late to offer the ‘rent-a-compute-networked-storage’ IaaS model to consumers and enterprises, which AWS and Microsoft have been doing for some time now.
Additionally, GCP takeup has been driven primarily by cloud-native use cases, and not so much by traditional enterprises.
Thanks to its pedigree in running large scale-out cloud infrastructure however, GCP remains a force to be reckoned with.
Two points are working for it: Google’s comprehensive vision, and its extensive experience with how cloud-native applications are developed.
At the inaugural Google cloud conference in March, the Mountain View, California tech giant stated unequivocally that it is dead serious about selling its cloud to enterprises – but it plays the game with a handicap.
Gartner’s Magic Quadrant report has this to say: “Google is still in the rudimentary stages of learning to engage with enterprise and midmarket customers, especially those that are not technology-centric businesses.
“Over the course of 2015, Google made only incremental GCP-related progress in this area.
“Despite a change in leadership at the beginning of 2016, we believe that there is still insufficient forward movement in service features, sales, marketing, globalisation and its partner ecosystem to make Google broadly attractive as a strategic cloud IaaS provider in 2016,” the report added.
Trailing, niche players
The Magic Quadrant report also listed other notable cloud players such as CenturyLink, Virtustream and Rackspace, all of which qualified as niche players that were able to execute pretty well.
Bringing up the rear of niche players were VMware Inc, IBM SoftLayer, NTT Communications, and Fujitsu Ltd.
What was interesting about these players is that three of them – CenturyLink, VMware and IBM SoftLayer – were tagged as visionaries in last year’s Magic Quadrant report. The three have since dropped into the bottom-left quadrant, which Gartner defines as niche players with a lower ability to execute on their visions.
The analyst firm defines niche players as providers that may be excellent for the use cases in which they specialise, but do not serve a broad range of use cases well or do not have a broadly ambitious roadmap.
Some also may have solid leadership positions in markets adjacent to this market, but have only developed limited capabilities in cloud IaaS.
Gartner said that IBM SoftLayer has a strong brand and existing customer relationships across the globe. It noted that it has some base with outsourcing customers but has limited differentiation beyond the hybrid blending of virtualised, bare-metal capabilities, as well as a broader geographic presence.
“IBM SoftLayer’s feature set has not improved significantly since IBM’s acquisition of SoftLayer Technologies Inc in mid-2013,” the report argued.
“It’s missing many cloud IaaS capabilities desired by mid-market and enterprise customers,” it said, adding that some customer feel they’re still dealing with a company with “a small-business experience” feel.
Meanwhile, CenturyLink was classified as a solid, capable and well-implemented basic cloud offering with a competitive feature set.
“[But] it’s potentially in an uncomfortable ‘in-between’ place in the market,” Gartner said.
“On one side are market leaders that have broad portfolios of capabilities and managed service provider partners, and who are increasingly capable of attracting risk-averse customers that might have previously chosen a vendor like CenturyLink.
“On the other side are niche providers who specialise in specific applications and compliance requirements,” it added.
Finally, Gartner said VMware has begun narrowing its focus on its cloud solution, called vCloud Air, to hybrid solutions for its existing customer base.
This isn’t surprising as the growth of vCloud Air has been slower than anticipated, while its network function virtualistion product, NSX, is not mainstream yet.
Gartner believes that vCloud Air is now merely one of several ways that VMware intends to address the growing shift towards cloud services, such as emphasising the role of service provider partners that use VMware technology, and delivering management capabilities for both VMware-based and non-VMware-based cloud infrastructure.
“While VMware continues to invest in the service, and the service continues to grow, VMware is no longer significantly expanding the geographic footprint of vCloud Air, nor investing in the engineering necessary to expand its feature set beyond basic cloud IaaS,” the analyst firm said.
It added that VMware has redirected its engineering investments into improving vCloud Air's infrastructure capabilities, including incorporating new VMware software features.
Gartner also argued that vCloud Air has limited appeal to the business managers and application development leaders who are typically the key decision-makers for cloud IaaS sourcing.
“VMware administrators in IT operations are the most likely champions of vCloud Air within a business, but they often prefer to build internal solutions, and they are also often the people that the business is trying to bypass by going to cloud IaaS,” the report said.
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