The top cloud providers for 2019 have maintained their positions, but the themes, strategies, and approaches to the market are all in flux. The infrastructure-as-a-service wars have been largely decided, with the spoils going to Amazon Web Services, Microsoft Azure, and Google Cloud Platform, but new technologies such as artificial intelligence and machine learning have opened the field up to other players.
Meanwhile, the cloud computing market in 2019 will have a decidedly multi-cloud spin, as the hybrid shift by players such as IBM, which is acquiring Red Hat, could change the landscape. This year’s edition of the top cloud computing providers also features software-as-a-service giants that will increasingly run more of your enterprise’s operations via expansion.
One thing to note about the cloud in 2019 is that the market isn’t zero sum. Cloud computing is driving IT spending overall. For instance, Gartner predicts that 2019 global IT spending will increase 3.2 percent to $3.76 trillion with as-a-service models fueling everything from data center spending to enterprise software.
In fact, it’s quite possible that a large enterprise will consume cloud computing services from every vendor in this guide. The real cloud innovation may be from customers that mix and match the following public cloud vendors in unique ways.
Key 2019 themes to watch among the top cloud providers include:
- Pricing power. Google recently raised prices of G Suite and the cloud space is a technology where add-ons exist for most new technologies. While compute and storage services are often a race to the bottom, tools for machine learning, artificial intelligence and serverless functions can add up. There’s a good reason that cost management is such a big theme for cloud computing customers–it’s arguably the biggest challenge. Look for cost management and concerns about lock-in to be big themes.
- Multi-cloud. A recent survey from Kentik highlights how public cloud customers are increasingly using more than one vendor. AWS and Microsoft Azure are most often paired up. Google Cloud Platform is also in the mix. And naturally these public cloud service providers are often tied into existing data center and private cloud assets. Add it up and there’s a healthy hybrid and private cloud race underway and that’s reordered the pecking order. The multi-cloud approach is being enabled by virtual machines and containers.
- Artificial intelligence, Internet of things and analytics are the upsell technologies for cloud vendors. Microsoft Azure, Amazon Web Services and Google Cloud Platform all have similar strategies to land customers with compute, cloud storage, serverless functions and then upsell you to the AI that’ll differentiate them. Companies like IBM are looking to manage AI and cloud services across multiple clouds.
- The cloud computing landscape is maturing rapidly yet financial transparency backslides. It’s telling when Gartner’s Magic Quadrant for cloud infrastructure goes to 6 players from more than a dozen. In addition, transparency has become worse among cloud computing providers. For instance, Oracle used to break out infrastructure-, platform- and software-as-a-service in its financial reports. Today, Oracle’s cloud business is lumped together. Microsoft has a “commercial cloud” that is very successful, but also hard to parse. IBM has cloud revenue and “as-a-service” revenue. Google doesn’t break out cloud revenue at all. Aside from AWS, parsing cloud sales has become more difficult.
To that end, we’re taking a different approach to our cloud buying guide and breaking the players into the big four infrastructure providers, the hybrid players, and the SaaS crowd. This categorization has pushed IBM from being a big infrastructure-as-a-service player to a tweener that spans infrastructure, platform, and software. IBM is more private cloud and hybrid with hooks into IBM Cloud as well as other cloud environments. Oracle Cloud is primarily a software- and database-as-a-service provider. Salesforce has become about way more than CRM.
- 2018 Annual revenue: $25.65 billion
- Annual revenue run rate based on latest quarter: $29.72 billion
AWS sees 2019 as an investment year, as it ramps its technology buildout as well as add sales personnel. Amazon didn’t quantify the higher investment, but said it would update throughout the year.
On a conference call with analysts, CFO Brian Olsavsky said 2018 was a lighter than expected year for capital expenditures. “AWS maintained a very strong growth rate and continued to deliver for customers,” he said. “2018 was about banking the efficiencies of investments in people, warehouses, infrastructure that we had put in place in 2016 and ’17.”
The cloud provider is the leader in infrastructure-as-a-service and moving up the stack to everything from the Internet of Things to artificial intelligence, augmented reality, and analytics. AWS is far more than an IaaS platform these days. AWS grew 45 percent in the fourth quarter — a clip that has been stable for the last year.
When it comes to developers and ecosystem, AWS is hard to top. The company has a wide range of partners (VMware, C3, and SAP) and developers growing the ecosystem. AWS is typically the first beachhead for enterprise players before they expand to a multi-cloud approach.
The big question is how far AWS can extend its reach. AWS can be a threat to Oracle on databases as well as a bevy of other companies. Via its VMware partnership, AWS also has a strong hybrid cloud strategy and can meet enterprise needs multiple ways.
AWS’ strategy was evident at its re:Invent conference. The show featured a barrage of services, new products, and developer goodies that was hard to track. Artificial intelligence is a key area of growth and a core sales pitch for AWS as it becomes a machine learning platform. According to 2nd Watch, AWS customers are going for these high-growth areas and seeing the cloud provider as a key cog for their machine learning and digital transformation efforts.
2nd Watch found that AWS’ 2018 fastest growing services were the following:
- Amazon Athena, with a 68-percent compound annual growth rate (measured by dollars spent with 2nd Watch) versus a year ago)
- Amazon Elastic Container Service for Kubernetes at 53 percent
- Amazon MQ at 37 percent
- AWS OpsWorks at 23 percent
- Amazon EC2 Container Service at 21 percent
- Amazon SageMaker at 21 percent
- AWS Certificate Manager at 20 percent
- AWS Glue at 16 percent
- Amazon GuardDuty at 16 percent
- Amazon Macie at 15 percent
Based on 2nd Watch usage, the most popular AWS services are:
- Amazon Virtual Private Cloud
- AWS Data Transfer
- Amazon Simple Storage Service
- Amazon DynamoDB
- Amazon Elastic Compute Cloud
- AWS Key Management Service
- Amazon Simple Notification Service
- Amazon Relational Database Service
- Amazon Route 53
- Amazon Simple Queue Service
- AWS CloudTrail
- Amazon Simple Email Service
Also: What serverless architecture really means, and where servers enter the picture
Analytics and forecasting may be one area worth watching for AWS. As AWS rolls out its forecasting and analytics services, it’s clear that the company can become more intertwined with real business functions.
AWS’ reach continues to expand in multiple directions, but perhaps the one to watch the most is the database market. AWS is capturing more database workloads and has emphasized its customer wins. A move to launch a fully managed document database takes direct aim at MongoDB. Should AWS capture more enterprise data, it will be entrenched for decades to come as it continues to evolve services and sell them to you.
- Commercial cloud annual revenue run rate as of latest quarter: $36 billion
- Estimated Azure annual revenue run rate: $11 billion
Microsoft Azure is the solid No. 2 to AWS, but it’s difficult to directly compare the two companies. Microsoft’s cloud business — dubbed commercial cloud — includes everything from Azure to Office 365 enterprise subscriptions to Dynamics 365 to LinkedIn services. Nevertheless, Microsoft’s strong enterprise heritage, software stack, and data center tools like Windows Server give it a familiarity and hybrid approach that wears well.
For differentiation, Microsoft has focused heavily on AI, analytics, and the Internet of Things. Microsoft’s AzureStack has been another cloud-meets-data center effort that has been a differentiator.
CEO Satya Nadella, on Microsoft’s second quarter earnings conference call, said the company’s cloud unit is honing in on verticals such as healthcare, retail, and financial services. This approach comes right out of the enterprise software selling playbook.
From a mix of services, it starts always with, I would say, infrastructure. So this is the edge and the cloud, the infrastructure being used as compute. In fact, you could say the measure of a company going digital is the amount of compute they use. So that’s the base. Then on top of that, of course, all this compute means it’s being used with data. So the data estate, one of the largest things that happens, is people consolidate the data that they have and so that they can reason over it. And that’s where things like AI services all get used. So we definitely see that path where they’re adopting the layers of Azure.
Simply put, Microsoft is selling a wide range of cloud products, but it’s hard to break out software-as-a-service versus Azure, which would more directly compete with AWS.
Macquarie estimates that Azure revenue in Microsoft’s fiscal second quarter was $2.75 billion for an annualized run rate of about $11 billion. Sarah Hindlian, an analyst at Macquarie, said in a research note:
Microsoft has been able to differentiate Azure in several critical ways, such as the company being both enterprise friendly and aggressive in layering in unique and incremental services such as Artificial Intelligence, Azure Stack, Azure Sphere, and a broad focus on edge computing and more advanced and complex workloads.
Indeed, Microsoft’s ability to target industries has also been a win. Notably, Microsoft has won over large retailers that don’t want to partner with AWS since they compete with Amazon. Microsoft also began highlighting more customer wins including Gap as well as Fruit of the Loom.
That take was also echoed elsewhere. Daniel Ives, an analyst at Wedbush, said AWS remains the big dog, but Microsoft has some unique advantages in the field — notably a strong organization and ground game. Ives wrote:
While Jeff Bezos and AWS continue to clearly be a major force in the emerging cloud shift over the coming years, we believe Microsoft with its army of partners and dedicated sales force have a major window of opportunity in 2019 to convert enterprises to the Azure/cloud platform based on our recent in-depth discussions with partners and customers.
Simply put, Microsoft can couple Azure with its other cloud services such as Office 365 and Dynamics 365. With Azure, Microsoft has a well-rounded stack, ranging from infrastructure to platform to applications to run a business.
- Annual revenue run rate: $4 billion+
Google Cloud Platform has been winning larger deals, has a new leader with Oracle veteran Thomas Kurian and is seen as a solid counterweight to AWS and Microsoft Azure. However, Google isn’t divulging annual revenue run rate or providing much guidance on its cloud financials.
On Google’s fourth quarter earnings conference call, CEO Sundar Pichai cited numerous data points for Google Cloud Platform (GCP). However, analysts were frustrated by the lack of revenue disclosed. To kick off 2018, Pichai said Google’s cloud revenue was $1 billion a quarter evenly split between G Suite and GCP.
In 2019, Pichai held back on his run rate chatter, so it’s unclear whether GCP is gaining on AWS or Azure or just growing because the overall cloud pie is growing. Specifically, Pichai outlined the following:
- The number of Google Cloud Platform (GCP) deals worth more than $1 million doubled.
- The number of multiyear contracts doubled. “We’re getting large wins, and I look forward to executing here,” said Pichai.
- G Suite has 5 million paying customers.
- There’s an uptick in the number of deals worth more than $100 million.
CFO Ruth Porat said:
GCP does remain one of the fastest-growing businesses across Alphabet. As Sundar said, we’ve doubled the number of GCP contracts greater than $1 million. We’re also seeing early nice uptick in the number of deals that are greater than $100 million, and really pleased with the success and penetration there. At this point, not updating further.
Add it up, and GCP appears to be a solid No. 3 to AWS and Azure, but how distant it falls behind those two remains to be seen. Wall Street firm Jefferies is predicting that GCP will gain share over time.
One move that could boost Google’s cloud revenue is a move to increase G Suite prices for some users. G Suite, which competes directly with Microsoft’s Office 365, is raising its prices for the first time. G Suite Basic will raise prices from $5 per user per month to $6. G Suite Business will go from $10 per user per month to $12. According to Google, G Suite Enterprise, which runs $25 per user a month, isn’t impacted by the price increase.
Competitively, the pricing moves are in line with Office 365.
- Annual revenue run rate: $3.85 billion
Alibaba is the leading cloud provider in China and an option for multi-national companies building infrastructure there.
In its December quarter, Alibaba delivered cloud revenue growth of 84 percent to $962 million. The company has rapidly added customers and is currently in the cloud buildout phase. To wit:
Add it up, and Alibaba has a strong home-field advantage in China, but it also has global ambitions. Alibaba launched 678 products in the December quarter. Relationships with the likes of SAP are likely to put it on the radar for more enterprises with operations in China.
While the big cloud providers add more to their stacks with AI as the differentiator, there’s a market being carved out to manage multiple cloud providers. This crowd of cloud players used to focus on hybrid architecture to bridge data centers with public service providers, but now aim to be the infrastructure management plane.
Also: What Kubernetes really is, and how orchestration redefines the data center
Research by Kentik highlighted how the most common cloud combination was AWS and Azure, but there are customers working in Google Cloud Platform, too. According to the Kentik survey, 97 percent of respondents reported their companies use AWS, but 35 percent also said they actively use Azure too. Twenty-four percent use AWS and Google Cloud Platform together.
Also: What a hybrid cloud is in the ‘multi-cloud era,’ and why you may already have one
- Annualized as-a-service run rate: $12.2 billion
IBM’s cloud strategy and its approach to AI have a lot in common. Big Blue’s plan is to enable customers to manage multiple systems, services and providers and become the management console. IBM wants to be a part of your cloud environment as well as help you run it. In 2018, IBM launched OpenScale for AI, which is designed to manage multiple AI tools likely provided by the major cloud providers. IBM also launched multi-cloud tools. Think of IBM as the Switzerland of cloud adoption and computing services strategies.
The move by enterprises to use multiple public cloud providers is interesting and provides the rationale for IBM’s acquisition of Red Hat for $34 billion. IBM has its own public cloud and will deliver everything from platform-as-a-service to analytics to Watson and even quantum computing through it, but the big bet is that Big Blue with Red Hat can make it a leading cloud management player. For its part, IBM is taking its core intellectual property — Watson, AI management, cloud integration — and delivering it through multiple clouds.
The Red Hat acquisition is a bet the farm move by IBM. It remains to be seen how the IBM and Red Hat cultures come together. On the bright side, the two companies have been hybrid cloud partners for years.
Indeed, IBM CFO James Kavanaugh on the company’s fourth quarter earnings conference call reiterated the Red Hat reasoning and noted Big Blue is seeing more deals for IBM Cloud Private and its approach to “hybrid open” cloud environments. Kavanaugh added:
Let me pause here to remind you of the value we see from the combination of IBM and Red Hat, which is all about accelerating hybrid cloud adoption. The client response to the announcement has been overwhelmingly positive. They understand the power of this acquisition and the combination of IBM and Red Hat capabilities in helping them move beyond their initial cloud work to really shifting their business applications to the cloud. They are concerned about the secure portability of data and workloads across cloud environments, about consistency in management and security protocols across clouds and in avoiding vendor lock-in. They understand how the combination of IBM and Red Hat will help them address these issues.
Also: The AI, machine learning, and data science conundrum: Who will manage the algorithms?
IBM’s as-a-service revenue run rate exiting the fourth quarter was $12.2 billion to make it a strong cloud provider, but not comparable to the likes of AWS and Azure today. It is quite possible that the strategies of all the large cloud providers ultimately converge.
The new hybrid and multi-cloud landscape may be one of the more critical things to watch in the cloud wars for 2019.
Here are some key players to consider:
VMware: It is part of the Dell Technologies portfolio, and it has had traditional data centers in the fold for years. The company emerged as a virtualization vendor and then adopted everything from containers to OpenStack to whatever else emerged. Perhaps, the best move for VMware was its tight partnership with AWS. This hybrid cloud partnership is a win-win for both parties and both companies have continued to build on their initial efforts. The partnership is so interesting that VMware is helping to bring AWS on premises. To wit:
Of course, VMware also has its vRealize Suite, vCloud Air, VMware HCX, Cloud Management Platform, vSphere, and networking products.
Dell Technologies and HPE: Both of these vendors have multiple products to operate data centers and are plugging into cloud providers.
HPE’s plan boils down to multi-cloud, hybrid infrastructure that extends to the edge.
And then, there’s Cisco, which via acquisitions has built out a sizeable software portfolio. Cisco outlined a data center anywhere vision that revolves around plugging its application centric infrastructure (ACI) into multiple clouds. No matter how you slice the hybrid cloud game, the end state is the same: Multiple providers and private infrastructure seamlessly connected. Cisco also has partnerships with Google Cloud. Kubernetes, Istio, and Apigee serve as the glue in the Cisco-Google effort.
While the hybrid cloud market was widely panned as legacy vendors cooking up new ways to sell hardware, the new multicloud world has more acceptance even among the former upstarts who wanted to turn the likes of IBM, VMware, Dell, and HPE into dinosaurs.
The SaaS market also highlights how vendors and their changing strategies and acquisition plans make cloud classification more difficult. In the 2018 edition of our cloud rankings, Oracle was lumped into the AWS, Azure, and GCP crowd largely because it was trying to play in the IaaS market.
While CTO Larry Ellison still seems to be obsessed with AWS, Oracle is essentially a software- and database-as-a-service company. Perhaps Oracle’s efforts to automate the cloud and cook up next-gen infrastructure pay off, but for now, the company is really about software. Salesforce via the acquisition of MuleSoft has also changed its stripes a bit and added an integration spin to the cloud strategy (and even a bit of traditional software licensing). SAP has grown into a sizable cloud player and Workday has opened its ecosystem.
Covering every SaaS player is beyond the scope of this overview, but there are a group of vendors that could be called SaaS+. These cloud service providers extend into platforms and all of these vendors have multiple SaaS products that can run your business.
- Annual cloud services and license support revenue run rate: $26.4 billion
- ERP and HCM annualized revenue: $2.6 billion
In Gartner’s 2018 Magic Quadrant for IaaS, the research firm narrowed the field to just cloud companies. Oracle made the cut. It wouldn’t be surprising if Oracle was reclassified in 2019 out of the infrastructure race.
Let’s get real: Oracle is a SaaS provider and there’s no shame in that. In fact, Oracle is damn good at the SaaS game and has everything covered from small- and mid-sized enterprises via NetSuite to large companies migrating on-premise software to the cloud.
But the real differentiation with Oracle is its database. The company has a massive installed base, an autonomous database that aims to take away grunt work and the potential to put its technology on more clouds beyond its own. Oracle is pitching itself as a Cloud 2.0 player.
For now, Oracle is a bit obsessive about AWS. Consider:
Andy Mendelsohn, executive vice president of database server technologies at Oracle, said it’s very early in the cloud migration of databases. “In the SaaS world it’s a mature market where enterprise customers have accepted they can run HR and ERP in the cloud,” he said. “Database in the cloud has very little adoption.”
Mendelsohn said what Oracle sees more of is customers using services like Cloud at Customer and a private cloud approach to moving databases. Initiatives like Oracle’s autonomous database may be more about a private cloud approach, he said.
Among smaller companies, databases are more prevalent in the cloud because there’s less investment needed.
“The big battleground will revolve around the data. It’s the core asset at every company out there,” he said.
Cloud at Customer is part of how Oracle sees its multi-cloud strategy. Analysts have raised concerns that Oracle should run its software and databases on more clouds.
Following Oracle’s second quarter earnings in December, Stifel analyst John DiFucci said:
While we continue to think Oracle is well-positioned in the SaaS market, we remain more cautious around PaaS/IaaS, both in terms of top-line revenue and associated cap-ex implications.
While there is little question in our mind that Oracle’s installed base is extremely secure, we believe that a large portion of net new database workloads are going to non-Oracle platforms (hyperscale solutions, NoSQL, open source, etc).
We remain cautious on Oracle’s IaaS efforts and support the notion of Oracle increasing support for other clouds.
Mendelson said that Oracle has worked with multiple vendor strategies throughout its history, so it’s not much of a stretch to see multi-cloud emerge over time.
- Annual cloud revenue run rate:$14 billion
- Sales Cloud annual revenue run rate: $4 billion
- Service Cloud annual revenue run rate: $3.6 billion
- Saleforce Platform & Other annual revenue run rate: $2.8 billion
- Marketing and Commerce Cloud annual revenue run rate: $2 billion
Salesforce started as a CRM company 20 years ago and has expanded into everything from integration to analytics to marketing to commerce. Woven throughout the Salesforce clouds are add-ons such as Einstein, an AI system.
Simply put, Salesforce wants to be a digital transportation platform that is targeting fiscal 2022 goal of revenue between $21 billion to $21 billion.
Most cloud vendors — public, private, hybrid or otherwise — will tell you the game is capturing data under management. Salesforce also sees the promise of being the data platform of record.
Enter Salesforce’s Customer 360. The master plan is to use Customer 360 to enable Salesforce customers to connect all their data into one view. The idea isn’t exactly original, but Salesforce’s argument is that it can execute better and put the customer at the center of the data universe.
Add it up, and Salesforce is becoming a platform bet for its customers. Salesforce co-CEO Keith Block said the company is landing more deals worth $20 million or more and recently renewed a nine-figure win with a financial services company. Marc Benioff, co-CEO and chairman, said that Einstein AI is being added into all of the company’s clouds.
Salesforce has also partnered well with the likes of Apple, IBM, Microsoft (in some areas), AWS, and Google Cloud.
The go-to-market strategy for Salesforce revolves around selling multiple clouds and developing industry specific applications such as the company’s Financial Services Cloud.
I’ve traveled around the world meeting with more than 100 CEOs and world leaders. The conversation is consistent everywhere I go. It’s about digital transformation. It’s about leveraging our technology. It’s about our culture, and it’s about our values. This C-level engagement is translating into more strategic relationships than ever.
For 2019, there’s little on the radar — short of a broad economic downturn — that would derail Salesforce’s momentum. Yes, Oracle and SAP remain fierce rivals with the latter actively pitching its next-gen CRM system, but Salesforce is seen as a digital transformation engine. Microsoft is another competitor worth watching, since it also wants to offer a single view of the customer. Dynamics 365 is becoming more competitive with Salesforce. With its Marketing Cloud, Salesforce competes with Adobe. As Salesforce continues to expand so will its competitive set.
More on Salesforce:
- Annual cloud subscriptions and support revenue: €5 billion
- Annual cloud revenue run rate: €5.64 billion
SAP has a sprawling cloud software business that runs from ERP and HR to expenses (Concur) as well as Ariba. The company is primary enterprise software, but customers are migrating to the cloud. SAP’s approach rhymes with Oracle’s strategy, but there’s a key difference: SAP will run on multiple clouds.
CEO Bill McDermott noted the SAP cloud partners on the company’s fourth quarter earnings call. “SAP has strong partnerships with Microsoft, Google, Amazon, Alibaba, and others to embrace this value creation opportunity,” he said. “Customers can run on-premise, in a private cloud or in the public cloud. It’s their choice.”
The SAP cloud lineup consists of the following:
- SAP S/4HANA Cloud
- SAP SuccessFactors
- SAP Cloud Platform, Data Hub (which are hybrid plays)
- SAP C/4 HANA
- Business network software (Ariba, Concur, and Fieldglass)
In the end, SAP is a mix of traditionally licensed software and cloud versions. CEO Bill McDermott also outlined some big growth goals. For 2019, SAP is projecting cloud subscription and support revenue between €6.7 to €7.0 billion.
Going forward, SAP is projecting cloud subscription and support revenue of €8.6 to €9.1 billion. By 2023, SAP wants to triple cloud subscription and support revenue from the 2018 tally.
More on SAP:
- Annual cloud revenue run rate: $3 billion
Workday made its name with human capital management, expanded into financials and ERP, and is adding analytics via a series of acquisitions.
Before AWS became an Oracle obsession, Workday was a primary target of Larry Ellison’s rants. Those verbal barbs from Ellison became a tell that Workday was faring well.
Most of Workday’s revenue derives from HCM, but the company is starting to sell financials along with it. In other words, Workday is trying to develop that multi-cloud playbook that Salesforce has going. That said, Workday also has a lot of runway for HCM. Workday hasl half of the Fortune 50 as customers and about 40 percent of the Fortune 500.
The analytics business for Workday is being developed via acquisition. Workday acquired Adaptive Insights, a business planning player, and will target analytics workloads.
While Workday fared well on its own, the company was slow to broaden its ecosystem and run on infrastructure from the public cloud giants. Workday has opened up to allow customers to run on AWS and that’s a big move that could pay dividends in the future.
The company also launched the Workday Cloud Platform, which allows customers to write applications inside of Workday via a set of application programming interfaces. The Workday Cloud Platform, launched in 2017, makes its platform more flexible and open.
In 2019, you can expect Workday to explore expansion ito more industries beyond education and government. Healthcare could be an option for a broader effort.
Robynne Sisco, CFO of Workday, said at an investor conference in December:
When you think about expanding in terms of industry operational systems, there’s really a lot that we could do going forward. We could do retail. We could do hospitality. As of right now, we’ve got a lot of things we’re working on. So we’re staying where we are. But industry does become very important when you talk about selling financials.
Workday is also targeting more mid-sized businesses with Workday Launch, a fixed-fee, preconfigured application package.
The competitive set for Workday is Oracle and SAP for HCM and Financials. Also watch Salesforce, which is a Workday partner and potential foe in the future. Another wild card for Workday will be Microsoft, which is integrating LinkedIn more for HR analytics.