Amazon’s market lead in infrastructure services dwindles as IBM and Microsoft claw deficit back

Amazon Web Services is still the dominant market leader in infrastructure services, but IBM and Microsoft are closing the gap in revenues with Google well off the pace, according to the latest number crunching by analyst firm Synergy Research.

For the research house, it represents the first changing of the record in some time, having previously been huge advocates of Amazon’s market offering. AWS was “in a league of its own” this time last year, and “dwarf[ed] all competition” in November, Synergy argued.

At the time it was an irresistible viewpoint, and one CloudTech heartily agreed with in an editorial piece at the time.

Yet things have changed. Microsoft, and IBM particularly, have upped their game in 2014. And it can’t go unnoticed. Microsoft and IBM have gained market share over the past four quarters while AWS and Google remained at similar levels, according to Synergy.

The overall effect of this can be seen in the table below:

It’s worth noting here that this study only examines cloud infrastructure services – IaaS, PaaS, private and hybrid. Synergy assesses that AWS revenues in this market are ‘well in excess’ of $1bn per quarter, and while Microsoft and IBM have similar figures per quarter, a lot of this is tied up in software/SaaS and cloud-related hardware products.

So what does this report mean for the main players? According to chief analyst John Dinsdale, it appears to be a mere blip for AWS.

“I do not think that Amazon is resting on its laurels – quite the opposite actually,” he tells CloudTech via email. “It is continuing to innovate and introduce new service offerings, [and] is looking and feeling like a company that intends to maintain its leadership position.”

While the main pretenders to Amazon’s throne have all caught up, Google has stood still. Dinsdale argues its lack of enterprise presence is inevitably holding it back.

“Amazon didn’t [have an enterprise presence] but it is benefiting from being the first to market and staying in front of the pack – so it has built the scale and now has credibility with enterprise customers,” says Dinsdale.

“IBM and Microsoft do, and they can leverage that,” he adds.

The study focuses on a quarterly survey of cloud operators alongside extensive supplemental research, and having covered it in detail for over two years, Dinsdale feels Synergy has a pretty good grasp on the market.

Amazon is looking and feeling like a company that intends to maintain its leadership position

In other words, the goalposts haven’t moved – which may be interesting considering the amount of up-and-coming players who have made big bets in the space, including Fujitsu, HP and SAP.

Dinsdale says Fujitsu “is a major player”, but not quite big enough yet to feature in this report (the company ranks #7 in Synergy’s analysis), while adding that HP is “now moving quite aggressively and becoming a substantial infrastructure services player.” Salesforce, who could be seen as the black sheep when compared to AWS, Microsoft, IBM and Google in this report, is there on the strength of its PaaS offering, Dinsdale explains.

Amazon reported a loss of $126m across its portfolio in Q2, with the company expecting to lose between $410m and $810m in Q3. Revenues in its ‘other’ business markets – of which AWS is a major part – suffered deceleration in the second quarter, suggesting that the price cuts on its AWS packages are beginning to be felt in the profit margins.

“We remain heads-down focused on driving a better customer experience through price, selection and convenience,” said chief financial officer Tom Szkutak, in an analyst call transcribed by Seeking Alpha.

“We believe putting customers first is the only reliable way to create lasting value for shareholders,” he added.

Despite this, the Q2 figures show Amazon definitely has challengers to its crown in both revenue and innovation – and they’re not going to go away soon, either.

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