How Microsoft's Cloud Compares to AmazonDate Published: 2016-08-29
Author: Ophir Gottlieb
Microsoft Corporation (NASDAQ:MSFT) and Amazon.com Inc. (NASDAQ:AMZN) have emerged as the two tech giants in the cloud wars. Let's take a quick look at the two businesses.
Both Microsoft and Amazon.com wowed investors with their latest earnings releases when it came to their cloud businesses. Microsoft does not break out its cloud (Azure) business explicitly, but rather lumps it in with other products in its "intelligent cloud" product segment per an article published by Barb Darrow on Fortune.
Having said that, it's not hard to find some pretty nailed down estimates for Azure. Here is some analysis delivered by Statista.
For a sense of scale, Facebook's total revenue over the trailing-twelve-months is $22 billion. The company's CEO said this on the latest earnings call, which definitely gives us a clearer picture:
Not to be outdone, here are the estimates for Amazon.com's AWS cloud business:
Those are quarterly numbers for Amazon.com, so roll them up to make a year. The last four quarters have delivered just under $10 billion in revenue.
Amazon's cloud is the oldest public cloud, debuting in 2006 but Microsoft came around a few years later in earnest. The total public cloud market is shaping up to be a monster. Here's the total trend from Statista:
But, Microsoft claims to have an advantage, and it isn't price. Here's what Microsoft's CEO, Satya Nadella said on the latest earnings call, back in July.
Nadella went on to highlight the "hybrid" approach that the company allows. Hybrid is code for allowing customer applications to run either in the Azure cloud or to run in customers' data centers. "Rival AWS runs the applications only in its own data center" (Forbes).
In fact, Nadella responded to a question from Goldman Sachs' Heather Bellini, specifically asking him to compare Azure to AWS and Nadella responded with:
If it sounds like Amazon is smaller, it isn't. Amazon focuses on Infrastructure as a Service (IaaS) as opposed to Microsoft which does IaaS and Platform as a Service (PaaS) as well as Software as a Service (SaaS). In the IaaS world, Amazon.com dominates.
Amazon.com's first mover advantage took it from a platform where developers could test for a low cost, into, what they call the "virtuous cycle," garnering more developers, more revenue, larger expansion, on onward until Amazon now calls Netflix, Comcast and even the CIA customers. This virtuous cycle has pushed Amazon's lead in innovation.
In fact, to take the bloom off of Microsoft's rose, Gartner analyst Anderson says said that "A lot of [Microsoft's] growth is because of how well they used [Enterprise Agreements] as a lever and a tool."
So there you have it. The two giants, competing head-to-head in a public cloud market set to hit nearly half a trillion dollars within five years. Google is already in the mix, and we know that Apple will join.
But we just looked at vendors, that's not the secret to this thematic boom. It's the chips.
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