Ready To Rumble: Amazon Still Dominates Public Cloud, But Microsoft Gains Speed

Public Cloud Battle

The Q3 results are in, and it should surprise no one that Amazon Web Services still dominates the public cloud arena. While the first cloud provider is still greatest and can boast higher revenue than its next four competitors combined, the takeaway headline from Q3 has to be Microsoft's phenomenal growth.

Microsoft is expanding at a clip almost 2.5 times faster than AWS -- a solid thrust away from the pack, though still not close to the heels of its cross-town rival.

Somewhere behind those two juggernauts sit Google, IBM, Salesforce and Rackspace.

Synergy Research Group compiled the recently released Q3 numbers to shed light on who's in the lead, and who's playing catch-up.

1. AWS

With a hold on 27 percent of the market, AWS is still the cloud's undisputed champion. But Amazon knows it can't rest on its laurels, especially with Microsoft giving chase. Amazon's 56 percent growth lags rivals who would love nothing more than to unseat the king.

But Amazon posted solid sequential growth after a lackluster second quarter, Synergy noted, and when you're big, less can still be more.

"It is notable that although AWS’s percentage growth rate may be substantially lower than Microsoft’s, in absolute terms AWS revenue growth over the past four quarters is greater than Microsoft’s total cloud infrastructure revenue over the same period -- AWS remains in a league of its own for scale," the Synergy report said.

2. Microsoft

The world's largest software company's Q3 cloud revenue grew by 136 percent, yielding Microsoft control of 10 percent of the public cloud market.

No one else is growing nearly as fast, but, as previously noted, there's a lot of road to cover to catch Amazon. With its Azure public cloud and Office 365 SaaS suite, Microsoft has hit its stride.

"Given the level of competition in the market, Microsoft’s growth rate has been truly impressive, reflecting a strong corporate focus on cloud and huge ongoing investment levels," said John Dinsdale, chief analyst and research director at Synergy Research Group.

3. IBM

IBM, with its SoftLayer cloud, can console itself with the bronze medal.

With seven percent of the market, IBM lags Microsoft by a few points and is nowhere near Amazon. And while the IBM cloud is growing at a healthy 72 percent, the company needs to fend off a challenger to the podium in Google, which is growing even faster.

SoftLayer has been successful as of late in acquiring major partners and customers, and is looking to differentiate itself as an enterprise-grade platform. IBM execs said they have no interest in getting involved in the cloud price wars and racing to zero.

4. Google

A push into the enterprise space with Google For Work might put some wind behind the Mountain View giant's sails and create new markets for expansion.

With 87 percent Q3 growth, Google is the next-fastest growing cloud behind Microsoft, though Microsoft is growing about 50 percent faster.

For all its effort, a variety of products including a popular app suite, and the largest collection of computing resources ever known to mankind, Google still only has five percent of the cloud market.

5. Salesforce

The CRM specialist is the only pure SaaS vendor on Synergy's chart, which makes Salesforce's four percent market share all the more impressive.

Growth in Q3 picked up a little from the previous quarter, but investors have high expectations of the cloud leaders, and 46 percent doesn’t always cut it.

6. Rackspace

It's been a roller-coaster year for Rackspace, but now that the company has shot down all bidders and put acquisition (though not privatization) talk to rest, maybe it's crossed a tipping point.

Rackspace is trying to differentiate itself in the crowded field as being the only true managed cloud. If nothing else, that moniker gives the San Antonio-based provider a rationale to say it doesn't really compete with those other guys anyway.

With 64 percent growth, Rackspace can make the argument that despite the turbulent period that ended with failure to reach any deals, the company is still a major player in the IaaS space with a unique offering for businesses.

But with only three percent of the market, investors still need convincing.

A Burgeoning Market

Synergy estimates that the cloud market as a whole -- counting SaaS, PaaS and IaaS offerings -- grew by 49 percent, a mark every company on the list other than Salesforce beat.

With earnings already announced by most of the major operators, Synergy calculates quarterly cloud revenues somewhere beyond the $4 billion milestone, and at $14.5 billion for the past year.

"On a rolling annualized basis the market grew by 49 percent, but it is notable that all four leading operators grew more rapidly than that, resulting in all of them gaining market share," the report said.