"It is an easy mistake to make," Technology Business Research principal analyst, Allan Krans, acknowledged. "Believing all the hype about how Amazon Web Services (AWS) is far and away the leader in the cloud computing market."
For Krans, if the market continues to define cloud leadership by the "narrow definition" of public cloud Infrastructure-as-a-Service (IaaS), then clearly, "AWS does not have much to worry about for some time". If scale is the name of the game, then AWS continues to comfortably dominate the IaaS industry, with an untouchable 45 per cent worldwide market share.
Despite Microsoft and Google having much higher growth rates, recent Synergy Research Group shows that collectively, AWS remains more than twice the size of the next three public IaaS providers combined. "It built and continues to dominate that space quite handily," Krans observed.
"However, the cloud market is actually much broader and larger than just public cloud IaaS, and the issue is that AWS has little to no presence in spaces such as Software-as-a-Service (SaaS), hosted private cloud, on‐premises private cloud and cloud professional services that represent a significant market opportunity.
"In fact, when looking at cloud overall, including markets where AWS does not participate such as public cloud SaaS, all areas of private cloud and the professional services that wrap around customers' cloud services, it is evident that Salesforce was the revenue leader until 2015, when Microsoft took over."
Looking ahead, Krans said Microsoft is expected to retain the lead as the largest overall cloud vendor in 2017 by leveraging a combination of legacy base migration and growth in areas that are either new or not historically successful.
In assessing the year just passed, Krans said the growth of Office 365 stood tall as the biggest contributor to Microsoft cloud revenue, generating nearly $US8 billion in SaaS revenue during 2016.
"While other vendors and analysts may say that including Office 365 for Microsoft makes for an unfair comparison, it is a cloud‐delivered service and major source of revenue and opportunity of which Microsoft is taking full advantage," Krans explained. "It also grants Microsoft entry into new segments such as cloud CRM and ERP through initiatives such as Dynamics 365, which integrates Office, CRM and ERP into one cloud package.
"Lastly, Microsoft is growing rapidly in the Azure IaaS and Platform-as-a-Service (PaaS) segments, areas that over time could challenge AWS on a head‐to‐head basis if Microsoft continues to exploit the advantages of a broader cloud portfolio." For now, however, Krans said Microsoft can "legitimately take the overall cloud revenue lead" from AWS due to the breadth of its portfolio and strategy.
Oracle off the pace
Meanwhile, at the other end of the market, Krans said Oracle will watch Salesforce pass the $US10 billion SaaS and PaaS mark with relative ease. With OpenWorld not too far in the rearview mirror, Oracle CEO Larry Ellison's prediction that his company will be the first to generate $US10 billion annually in SaaS and PaaS continues to reverberate. As reported by ARN, Ellison sought a headline moment in San Francisco with an outrageous and off point "Amazon's lead is over" declaration, despite facts getting in the way.
"This race between Salesforce and Oracle will not even be close," Krans predicted. "Our models have Salesforce generating revenue of $US9.94 billion during calendar 2017, which does not leave Oracle much time to close that gap and reach $US10 billion. That will prove too difficult for Oracle to achieve, in our estimate, as we predict that, even with the addition of NetSuite, Oracle will generate only $US4.5 billion in SaaS and PaaS revenue during 2017."
As Salesforce crosses the mark in 2018 with an estimated $US11.6 billion in revenue, Krans said Oracle will "come up short" of the $US10 billion mark again, with an estimated $US5.4 billion in revenue, including NetSuite contributions.
Perhaps in the end, Krans said it may be less important for Oracle to deliver on its "first to $10 billion" prediction than to demonstrate to customers it is serious about the cloud market. "Competitor‐focused marketing has long been a hallmark of Oracle's competitive strategy, with this project being the latest example," Krans said. "Even as Oracle will likely fail to deliver on its projection, we anticipate the vendor will continue aggressively growing revenue, which is as good a consolation prize as it could expect."