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Fortune 500

Amazon and Microsoft Are Running One and Two in Two-Cloud Race

Barb Darrow
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Barb Darrow
Barb Darrow
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Barb Darrow
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Barb Darrow
Barb Darrow
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August 4, 2016, 1:49 PM ET
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Amazon Web Services and Microsoft continue to lead the pack when it comes computing capacity for their public cloud services, according to Gartner.

The research firm’s closely-watched Magic Quadrant annual report surveys the amount and type of cloud computing services offered for rent by big companies. And this year’s edition shows this to be a two-horse race with market pioneer Amazon running first, while Microsoft continues a strong push at second.

Other contenders include Google, IBM (IBM), VirtuStream (part of EMC (EMC)), CenturyLink, Rackspace (RAX), and VMware (VMW).

Amazon’s (AMZN) continued strength will not surprise many considering the resources it has poured into this now-$10-plus billion a year business. AWS “has the largest share of compute capacity in use by paying customers — many times the aggregate size of all other providers in the market,” according to the report.

Last year, Gartner’s take was that AWS ran more than 10 times the cloud compute capacity as the next 14 cloud players combined. Asked whether that means Amazon’s dominance has held steady, grown, or decreased year over year, Gartner (IT) managing vice president Rakesh Kumar told Fortune the research firm does not have the exact comparable figure, but that it is “reasonable to assume” that AWS has maintained the same lead this year.

Last week, Gartner released another report showing Amazon dominating the cloud storage market as well.

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The odd man out here appears to be Google (GOOG), which has been trying hard to win market share from the other two powers and to prove that it is serious about the public cloud market. Google remains the third largest player by Gartner’s measures, but it has slipped a bit relative to the top two.

The report’s authors wrote that Google’s strengths lie in its big data analytics and machine learning technologies that it has used internally and is now offering to the public at large. Even AWS supporters love to use Google BigQuery and Bigtable, to parse and explore big amounts of data, for example.

Google has also made some strides entrenching its view of container management, as embodied in Kubernetes, to outside players. Containers, are a modern way to combine all the services needed for a software application into a portable unit that can, in theory, run on a company’s internal servers, on Google, or some other public cloud.

Google, by virtue of its resources, can also keep the bigger cloud guys honest with price cuts and innovative efforts like discounts that automatically kick in when a computer instance hits a certain level of use. But, the company continues to struggle when it comes to selling cloud services to business customers.

AWS, which turned ten years old earlier this year, is the most mature player in this category and offers the widest variety of services. That’s the good news. The bad news is that the flip side of all that variety is that AWS services are often complex to manage and its pricing model is complicated.

For more on Amazon’s cloud watch:

The analysts also pointed out that while AWS is still perceived as the cost leader, it is no longer “eager to be the lowest-cost bidder in a competitive situation.”

Microsoft, which has bet big on Azure, is seeing return on that investment, according to Gartner. It also has been rolling out new features and functions fast. And according to the report, Azure’s infrastructure and services are fine on their own but also “seamlessly extend and interoperate with on-premises Microsoft infrastructure.”

That can be a powerful sale to existing Microsoft shops that want their on-site IT to work well with their off-site cloud IT.

The downside of those Microsoft (MSFT) features and functions, however, is that some of them are not ready for use by big business customers, the analysts found. Gartner also noted a dearth of Azure cloud experts and cited “incomplete and sometimes out-of-date documentation.”

The most succinct summary of this 47-page report, which is not publicly available, came from one cloud watcher close to several of the providers and who thus requested anonymity: “AWS and Microsoft are the leaders. Everyone else is niche.”

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