New Research Shows Microsoft, IBM Notching Big Cloud Gains

An earnings survey released Monday by Synergy Research Group comparing revenue growth among the top five cloud service providers has Microsoft and IBM channel partners feeling giddy.

The two cloud vendors eclipsed the overall growth rate of an industry that’s booming. Microsoft’s year-over-year cloud revenue in the second quarter jumped 164 percent, likely inspiring some cartwheels in Redmond, Wash.

IBM, which made a strong move into the hybrid and private cloud infrastructure market last year with the acquisition of SoftLayer, clocked in 86 percent year-over-year growth for the quarter.

[Related: Here's Who Made Gartner's 2014 Cloud IaaS Magic Quadrant]

The explanation for these successes isn’t complicated, according to the report’s author, John Dinsdale: Microsoft and IBM have both been heavily focusing on their cloud businesses.

’And it’s not just talk,’ Dinsdale, Synergy chief analyst and research director, told CRN. ’They are backing it up with a lot of investment.’

Both diversified tech giants devoted much of their recent quarterly earnings calls to talking about their cloud businesses, Dinsdale noted.

’Microsoft also has a strong base of enterprise clients through its other product offerings, which gives it credibility and a good foundation for business expansion,’ Dinsdale said.

Chris Hertz, CEO of Washington D.C.-based Microsoft partner New Signature, told CRN the report ’is definitely welcome news as it validates everything we see in the marketplace.’

’Generally speaking, we just don’t see Google all that often in our mid-market accounts and Microsoft Azure has really taken off over the last 12 months,’ Hertz said.

New Signature is talking to nearly all of its customers about either testing the cloud waters or moving additional services for those already there.

’Office 365, Azure, Windows Intune and Dynamics CRM Online are always part of that conversation,’ Hertz said. ’It’s a big change from two years ago and even a big jump from a year ago as evidenced by the Synergy Group data.’

NEXT: Amazon And Google Make No Gains

The overall cloud market, a $13 billion per year industry, grew by 45 percent year-over-year, putting into context disappointing figures for Google and Amazon, which saw earnings growth of 47 percent and 49 percent, respectively, in the second quarter of the previous year -- numbers that would be an impressive uptick in just about any other industry.

The big takeaway from the survey is that AWS, the first purveyor of public cloud and front-runner by a mile, finally has some serious competition on its hands, according to the Synergy report.

But Dinsdale played down any notions of a new front-runner emerging in the near future.

’Amazon is not at risk of losing its lead any time soon. It is way ahead of the rest,’ he said, calling attention to a bar chart included with the report that visually demonstrates AWS dominant market share compared to its most-immediate rivals.

Amazon disappointed investors last week when it announced it did not sequentially grow its cloud revenue from the previous quarter. Dinsdale, however, attributed Amazon’s drop-off in its rate of revenue growth almost entirely to aggressive cost-cutting.

AWS ’is continuing to invest and to roll out new services and is building increasing levels of credibility within the enterprise market. In its earnings material it pointed to 90 percent growth in AWS usage over the past 12 months, so there’s plenty of customer momentum behind AWS,’ Dinsdale said.

The bar chart graphic for the first time doesn’t show AWS share of the market surpassing its four closest competitors, but instead slightly lagging behind the combined forces of Google, Salesforce, Microsoft and IBM.

Google, like Amazon, failed to capture any additional market share from the previous year, according to the report.

Dinsdale said Google has an approach in stark contrast from Microsoft to growing its cloud business.

Google ’has its cloud offerings out there, but you don’t get the sense that this is one of Google’s top priorities. And cloud was not mentioned once in Google’s earnings call,’ he said.

CRM heavyweight Salesforce.com saw year-over-year growth in the second quarter of 38 percent.

The Synergy report also showed that IBM and Microsoft both claim about $1 billion in quarterly cloud revenue, about the same as AWS. The difference, however, is that Amazon’s earnings came entirely from its IaaS business, while IBM and Microsoft rely more on SaaS offerings, hardware products and professional services.

Rackspace came in at number six in total revenue, just missing inclusion in the report, Dinsdale said.

PUBLISHED JULY 28, 2014