Thanks to Amazon, the cloud war is a fight for third place

Source:-qz.com

There’s never been a better time to be in the cloud business—even if you’re not Amazon.

Amazon Web Services has dominated cloud computing for the past nine years. But Google and Microsoft, both giants in the cloud market, are growing at a rapid pace. Alphabet, Google’s parent, posted fourth-quarter earnings results this week revealing that Google Cloud generated $8.9 billion in revenue for 2019, an impressive 53% growth from the previous year. Microsoft’s cloud operation, Azure, grew by 62% in the last three months of 2019, faster than any other cloud provider.

On the other hand, growth at Amazon’s cloud operation, AWS, has begun to slow. AWS grew 34% in the fourth quarter of 2019, reflecting a downward trend in growth that began in 2018. Currently, AWS accounts for a third of the $107 billion global cloud market last year. But there are signs that the playing field is about to get a little more even.

The Pentagon last year made waves by picking Microsoft over AWS for its $10 billion dollar JEDI contract, a decade-long project that leaves the software giant in charge of the U.S. military’s cloud computing systems. Amazon is still protesting the awarding of the contract in court, arguing there was bias in the evaluation process. For Microsoft, the JEDI contract will likely be the gift that keeps on giving. Prospective federal clients will likely want to follow in the defense department’s footsteps.

The CIA announced this week that it wanted to hire multiple companies for cloud computing, Bloomberg reported. Since 2013, AWS had been servicing all 17 agencies that make up the US intelligence agency under a $600 million dollar contract. Now, the door is open for other cloud providers to make their bids and earn a bigger slice of the pie.

But AWS doesn’t have anything to worry about, at least yet. That’s mostly because Amazon’s cloud services division is almost twice the size of Azure, its closest rival.

“We believe AWS will remain number one, although the gap will continue to close,” said Glenn O’Donnell, vice-president and research director at Forrester, in an interview with Quartz. O’Donnell said that barring a major catastrophe such as a security breach or outage, there’s very little chance AWS will budge from its top perch.

While Google Cloud was the fastest-growing cloud provider in 2019, swelling by nearly 88%, it started from a relatively modest base. Google Cloud is still only a third a size of Microsoft Azure. With Microsoft the fastest-growing cloud provider last quarter, it’s unlikely it will lose its hold on second place. O’Donnell believes that some of Microsoft’s growth is due to increased customer trust in Azure as a viable alternative to AWS. Enterprises are also hedging their bets and using both to avoid being locked into a single vendor.

The more interesting fight to watch, in the meantime, is the battle for the bronze medal. While Google Cloud is currently the third biggest cloud provider in the US, Alibaba holds third place globally. But if Google Cloud manages to score more US federal contracts, that may change.