Advanced Computing in the Age of AI | Monday, August 8, 2022

Cloud Revenue Growth at 50% Clip, Top 4 Providers Extend Dominance 

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Public cloud market growth is a steamroller on steroids. It’s also an industry that, if not winner-take-all, is increasingly dominated by the top quartet of service providers.

Second quarter data, released today by Synergy Research Group, Reno, NV, and confirming what other market watchers have reported of late, shows cloud infrastructure services spending jumped 50 percent YoY. According to the company, this was a near repeat of market growth in the first quarter and also shows accelerated growth over that of 2017.

Synergy’s numbers also show that Amazon Web Services maintained market dominance while four other contenders made gains on the leader.

Overall, Synergy estimates quarterly cloud infrastructure service revenues (including IaaS, PaaS and hosted private cloud services) for Q2 has surpassed $16 billion. The Q2 growth rate of 50 percent compares with a full-year 2017 growth rate of 44 percent and 2016 growth of 50 percent. Synergy reported that public IaaS and PaaS services account for the bulk of the market and grew by 53 percent in Q2. The top five providers control almost three quarters of the market. Geographically, the cloud market continues to grow strongly across all global regions, Synergy said.

“Revenue growth at Microsoft, Google and Alibaba far surpassed overall market growth rate, so all three gained market share, but market leader Amazon maintained its dominance as its market share nudged up a percentage point to 34 percent,” the company said, noting that AWS remains bigger than its next four competitors combined.

While the top four vendors enjoy the boom, it’s happening at the expense of small- to medium-sized cloud companies whose market shares are shrinking. “Among the top 25 cloud providers, only three other companies have seen their market share increase significantly, though none of the three has yet broken through the 1 percent market share threshold.”

A major advantage held by the bigger players is re-invest of their massive revenue streams into infrastructure upgrades. This week alone saw Google roll out new virtual machines that support persistent memory for in-memory workloads. And AWS announced a new “high frequency” instance targeting enterprise workloads requiring extensive memory capacity along with single-threaded performance for workloads such as chip design, financial transaction simulations and relational databases (see related story).

In addition, the largest contract in the history of the cloud computing – the Department of Defense’s $10 billion deal – is up for grabs, it will be awarded in September to one cloud provider and it would be a surprise if it doesn’t won by one of the market heavies.

“Well, they’ve done it again,” said John Dinsdale, a chief analyst at Synergy. “Amazon Web Services and its three main challengers all turned in some exceptional growth numbers in the quarter. Collectively those four firms alone accounted for well over three quarters of the sequential growth in cloud service revenues. In a large and strategically vital market that is growing at exceptional rates, they are throwing the gauntlet down to their smaller competitors by continuing to invest enormous amounts in their data center infrastructure and operations. Their increased market share is clear evidence that their strategies are working.”

As for IBM, its share remains near 8 percent, “thanks primarily to its strong leadership in hosted private cloud services,” Synergy reported.

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