The two most recent financial reports from Amazon and Microsoft are raising concerns over the rate at which adoption of cloud services will continue to grow.
Amazon revealed Amazon Web Services (AWS) revenue grew 37 percent, to $8.4 billion in its most recent quarter, a significant decline from the 49 percent growth achieved a year ago. Obviously, maintaining aggressive growth rates on a higher base of revenue is going to be a challenge for any company. However, in its most recent quarter Microsoft reported a 64 percent revenue growth in Azure sales, which also represents a slowdown compared to an over 80 percent growth rate a year ago.
According to a recent report from Gartner, AWS and Microsoft accounted for 64 percent of the Infrastructure-as-a-Service (IaaS) market at the end of 2018, with AWS alone accounting for nearly half of all revenue generated (48 percent) in market, valued at $32 billion. The next closest rival is Microsoft at 15 percent, followed by Alibaba (8 percent), Google (4 percent) and IBM (2 percent).
As a category, other now represents 23 percent of the market, a 4 percent drop from a year ago in an expanding market. Those numbers wouldn’t include higher level platform and middleware services, but in theory there should be plenty of room for continued growth in an overall IT market that is valued north of $3 trillion.
The top three providers, however, are clearly growing faster than everybody else. The future of cloud computing will involve multiple clouds, but the number of vendors participating in that multi-cloud universe may not be as broad as it is today.
Cloud computing services will continue to grow faster than other IT segments
Managed service providers (MSPs) that depend on the number of workloads moving to the cloud to drive their own future revenue growth will need to closely track growth rates for AWS and Microsoft as belle weathers. The rates of growth for both AWS and Microsoft fell below expectations.
It’s not clear yet whether this is a momentary blip or a signal that the rate at which customers will deploy applications in the cloud versus on-premises IT environments may not be as great as initially thought. It’s worth remembering that 80 percent of all workloads still run in on-premises IT environments that, in terms of collective revenue generated, still exceed spending on cloud revenue services by several orders of magnitude.
There are a whole host of reasons organizations are still running workloads on-premises, spanning everything from application performance to regulatory and cybersecurity concerns. The biggest and least appreciated may be simple inertia. Cloud computing is now over ten years old, so the fact that only 20 percent of workloads now run in the public cloud would suggest there are more factors at play here than many appreciate.
Whatever the future rate of growth, the numbers would suggest it will be a very long time before even more than half of all application workloads are running in the cloud. The IT world will be hybrid by definition through the end of the next decade, so MSPs would be wise to plan accordingly.
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