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Hyper-Scale Cloud Providers Chasing AWS Gained Market Share Last Year, But They Didn't Take It From AWS

Synergy Research compiled fourth-quarter financials revealing Microsoft, Google and IBM collectively gained share in the booming public cloud market, and it came at the expense of telcos and smaller cloud players.

Financial data from the final quarter of 2016 revealed the hyper-scale cloud providers chasing the industry's leader, Amazon Web Services (AWS), are gaining market share, but they're taking it from smaller players.

The overall public cloud services market – which includes Infrastructure-as-a-Service and Platform-as-a-Service – is still on fire, having surpassed $7 billion in revenue in the fourth quarter of 2016 and growing at a clip of almost 50 percent a year, according to a report released Thursday by Synergy Research.

Managed private cloud services quarterly revenues now hover above $9 billion. IBM leads that part of the market and traditional IT outsourcing vendors, like Rackspace, also remain highly competitive.

[Related: Synergy Research: Microsoft On Salesforce's Heels In White-Hot SaaS Market]

The most striking revelation from Synergy's analysis is that Microsoft, Google and IBM made impressive leaps from the fourth quarter of 2015 to the same period in 2016. Their combined share expanded by five percent in that period, from roughly 18 percent to 23 percent, powered by strong growth of Microsoft Azure and Google Cloud Platform.

But AWS didn't slip at all, still holding more than 40 percent market share at the end of 2016, just as it did the previous year.

"While Microsoft, Google and IBM are growing at impressive rates and gaining market share, their gains are coming at the expense of smaller cloud providers and not AWS," said John Dinsdale, Synergy's chief analyst, wrote in the report.

The 10 providers trailing the pack, including notable contenders like Oracle, Rackspace, NTT, Alibaba, Salesforce and China Telecom, also mostly held ground as a collective, only down 1 percent in combined share, from 19 percent in Q4 2015 to 18 percent in 2016.

It was the "very long tail of small-to-medium sized cloud service providers," according to Dinsdale, who most felt the pinch, losing share even though most saw individual growth that would be respectable for most other industries.

That wide range of companies includes telcos like Deutsche Telekom, BT, CenturyLink, Orange and SingTel; traditional providers such as CSC, SunGard, HPE, Datapipe and OVH; and specialists like DigitalOcean, Joyent, Virtustream and Engine Yard.


"There are good reasons why AWS is staying at the forefront of the market, and serious challengers need to follow the AWS example," Dinsdale noted in the report.

Amazon has "no intention of letting its crown slip," Dinsdale said in an email to CRN. The public cloud kingpin is maintaining that top position by making huge investments in infrastructure, adding services, and winning credibility with large enterprises—all with the long-term backing of its senior management.

"AWS is checking all of those boxes, and any serious challengers need to do likewise," Dinsdale said.

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