Cloud Computing

Trying to compete with hyperscale providers? Outlook cloudy

Amazon Web Services, Microsoft Azure, and Google Cloud haven’t budged an inch from the top of the cloud market.
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Francis Scialabba

· 3 min read

A triumvirate of cloud computing providers continues to rule the sector globally and is entrenching its power, far outstripping any efforts to dislodge them, according to a recent report by Synergy Research Group.

Synergy’s data shows the three biggest cloud computing providers—Amazon AWS, Microsoft Azure, and Google Cloud—are continuing to dominate the sector even as it grows by an estimated 34%–40% a year. Amazon’s share of global cloud computing held steady at 33% in Q1 2022 compared to the year prior, while Microsoft’s grew almost 2% to 22%, and Google ticked up about one point year over year, to 10%. Collectively, Synergy’s report indicated those three companies control in the neighborhood of 65% of the $53 billion in enterprise cloud spend that quarter.

Every other cloud provider makes up the remaining 36%—and a significant share of that is in the Chinese market, which Synergy’s chief analyst and managing director John Dinsdale wrote in the report “remains totally dominated by local Chinese companies.” To put this in perspective, back in Q1 2018, Synergy estimated these companies outside the big three comprised 48% of the market. At the same time, these companies have seen a growth in revenue by over 150% since Q1 2018.

“While the level of competition remains high, the huge and rapidly growing cloud market continues to coalesce around Amazon, Microsoft, and Google,” Dinsdale wrote.

The mammoths in the room

Antitrust regulators and legislators largely haven’t paid the same amount of attention to competition concerns in cloud computing as they have other markets like e-commerce, advertising, and social media—even though hyperscale critics have cited potentially anti-competitive tactics like egress fees, lengthy contracts, bundling, and self-preferencing. (Microsoft, in particular, is facing scrutiny in Europe over a pricing structure that some customers say “hinders” using rival clouds to run its products.) According to Wes Miller, a former Microsoft employee who is now a research analyst at enterprise IT advisory Directions on Microsoft, the segment is “growing much less competitive.”

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“There’s a lot of other places that you could run [cloud] software besides the big three,” Miller told IT Brew. “But the reality is, that’s where everybody’s going…I look at cloud today, as I’m a big car fan, as the auto industry back in the early 1900s, when there were hundreds, if not thousands, of automakers. And we eventually got to the point that now, technically, there’s like four or five because everything’s interrelated. So I think we’re getting to a point of consolidation.”

Miller said that the big three enjoyed a first-mover advantage in cloud computing with “self-fulfilling” economies of scale that make it difficult for competitors to catch up.

Don’t buy the hype

Hyperscale providers like Microsoft and Amazon in particular are also trying to make their earnings more consistent by locking customers into years-long agreements, Miller cautioned.

“Agreements that you sign that will affect you for multiple years in terms of how much you’ll use, how you’ll use it, what you’ll consume, and what you’ll pay—you have to be very, very careful. Particularly because it’s hard to understand what your cloud spend is going to be until you’re actually sitting in the cloud,” Miller said. “There’s a potential downside to it if they’re moving too much, too fast and don’t understand what they’re signing up for.”—TM

Top insights for IT pros

From cybersecurity and big data to cloud computing, IT Brew covers the latest trends shaping business tech in our 4x weekly newsletter, virtual events with industry experts, and digital guides.