Amazon broke out its AWS revenue yesterday for the first time, and the results were so impressive, it makes you wonder why it didn't do it sooner. Here's the thing though, every cloud vendor is experiencing growth and there's evidence that the cloud will continue to grow substantially over the next several years.
In other words, there's plenty of money still be found in the cloud. This is in spite of the fact that cloud services are absurdly cheap, and for the most part continuing to get cheaper all the time.
Big Money in the Cloud
First a look at the numbers. AWS matched analyst expectations with a $1.5 billion quarter with $265 million in profits. CEO Jeff Bezoz predicted that would translate into a $5 billion year. Not too shabby, but the cloud business is not just AWS and others reported similarly good runs.
Microsoft also announced an annual cloud run rate of $6.3 billion (according to a Fortune article). These numbers seem quite large, but then consider IBM announced its 12 month cloud revenue at $7.7 billion. Further, IBM claimed its cloud revenue grew 75 percent in the first quarter of this year.
It's important to remember that AWS is a side business for Amazon, whose main business remains its online retail site. Secondly, IBM and Microsoft aren't breaking out their cloud revenue, so what they call cloud revenue could be broadly defined. Microsoft's revenue very likely includes Office 365 as an example.
Mind The Gap
It's interesting to note that an October NetworkWorld article speculated that when you looked purely at infrastructure services, the gap was far wider than yearly revenue run rates would suggest:
"New Hampshire-based firm Technology Business Research estimates Amazon’s cloud revenue at more than $4.7 billion this year.TBR pegs Microsoft’s public cloud IaaS revenue at $156 million and Google’s at $66 million. If those estimates are correct than Amazon’s cloud revenue is 30 times bigger than Microsoft’s," according to the Network World article.
None of this takes into account the big unknown, Alibaba, the Chinese online retail powerhouse, which has a nice cloud business of its own. It's a company I've warned, after the $25 billion IPO last year, could begin to chip away at the Big 3. A recent Bloomberg article suggests, Alibaba is doing well in China, but could be looking to expand outside in the near future.
For now, we don't know Alibaba's cloud income, but according to the same Bloomberg article, it claimed last year that it has 1.4 million customers and controls 22.8 percent of the Chinese infrastructure market.
All of these numbers can get confusing, but there's a clear pattern, regardless of how the market breaks down. There's lots of money out there, billions and billions of dollars and everything suggests that the cloud market, however you choose to define that, has plenty of room to grow over the next five years.
That means the pie is going to get bigger and these companies (and others) will continue to battle it out for our cloud dollars. AWS has a clear advantage having come out of the gate first, but over time, the big infrastructure players are going to continue to fight it out. As that happens, and these companies squeeze greater efficiency from their services, prices will very likely continue to drop, but not at the cost of profits (because of that high efficiency).
There's surely gold up in the clouds and these companies are trying to extract as much as they can.
Photo Credit: Philip Taylor on Flickr. Used under CC by SA 2.0 license.