Cloud Industry Preview 2017: The Future of the Cloud Computing Business

Cloud Industry Preview 2017

Over the past several articles in this Cloud Industry Review 2016 series, we’ve seen the business side of the cloud industry. We covered all the top cloud service providers (CSPs), their strengths, how big their cloud businesses are, what their future looks like and so on.

In this final summary piece we’ll put everything together and see where each company stands in its core areas of strength within cloud capabilities. More importantly, we’re going to look at the future direction these companies will take, which is why we’re calling this article a “preview” and not a “review”; we’re done with the review part. It is now time to see what the future of the business of cloud computing looks like.

You can review the entire series at this link: Cloud Industry Review 2016

Let’s begin with the first two layers of cloud – Infrastructure-as-a-Service and Platform-as-a-Service.

IaaS and PaaS: Amazon out in Front

Amazon, the one who got into the cloud industry early – or, to put it more aptly, the company that took the third-party managed infrastructure mainstream – remains the company to beat when it comes to Infrastructure-as-a-Service.

How do we know this? We didn’t do massive surveys or have industry input to back up that claim, but we strongly believe that the results are already out in the open for everyone to see. It’s just that they’re obscured by the way each company reports its cloud revenues.

Microsoft’s annualized cloud revenue exceeded $13 billion at the end of first quarter 2017, which means their monthly revenue has now crossed $1.08 billion. Amazon reported $3.231 billion in the most recent quarter, which means their monthly revenue is already above the one billion mark.




Amazon does not have any hold in the SaaS market the way Microsoft does, and the Redmond giant’s business productivity segment has been exploding. Microsoft Azure has grown at triple digit speeds over the last several quarters, year-over-year, and their total cloud revenue has only now caught up to Amazon’s near-pure-play cloud infrastructure revenues. What Microsoft achieved with SaaS-PaaS-Iaas, Amazon has done with PaaS-IaaS alone.

Amazon is not a big fan of the hybrid cloud model, and is clearly focused on the public cloud market. To that end it is building services and features at a furious pace. They never had time to worry about the competition as they relentlessly focused – and continue to focus – on expanding their own services list when it comes to IaaS.

SaaS: Microsoft pulls Ahead

Microsoft is a completely different company under its current CEO Satya Nadella. Though the company said their focus is on the “cloud first, mobile first” approach, in reality, it’s more of an “enterprise first, everything else next” direction that they’re taking. Microsoft has been relentless when it comes to building software applications that can be used by businesses. The office productivity segment is already in Microsoft’s bag and now they have set their eyes on business management software such as CRM and ERP as well.




In addition, they’ve also launched AppSource to try and leverage their huge client base to attract software companies and independent developers to bring their SaaS business apps and sell it on the AppSource platform.

Microsoft is moving towards becoming the company with the widest breadth of SaaS offerings, with a significant stake in all of the SaaS, PaaS and IaaS areas. The more their SaaS portfolio grows, the further it will fuel the growth of Microsoft Azure, which is already posting the strongest growth in the industry.

Microsoft, we believe, will eventually overtake Amazon in terms of overall cloud revenue, mainly due to their strength in the SaaS segment, while Amazon remains the King of IaaS.

Hybrid Cloud : IBM from the Beginning

IBM’s cloud revenue growth has, until now, kept the pace with Microsoft and Amazon. But where it differs from the top two is the segment it wants to serve in the cloud: Hybrid. From the start, IBM kept its eye on the hybrid cloud solutions segment, and it will pay off Big Blue big time in the long run.




We’ve already seen how hybrid is the model adopted by 47% of businesses, and in the large enterprise segment that percentage is likely to be much, much higher. Most of these businesses have vast amounts of legacy archived data that won’t make sense to move to a public cloud. In other situations, security or regulatory compliance makes the use of public cloud prohibitive. And IBM is well-placed to capture that niche market, which isn’t actually niche when you consider the trillion-dollar IT infrastructure industry we’re talking about.

These large enterprises wouldn’t mind exploiting some of the advantages cloud computing brings to the table, but to host all of their data in someone else’s data center is not something that they would want. Data sovereignty is the buzzword here, on-premise infra extended by a public cloud is a much better option because it offers the best of both worlds.

And this is the area IBM has already positioned itself to address over the next several decades.

Oracle and Google

Both of these companies are outliers because they were late to the cloud party, and both are now paying the price – one for its decisive anti-cloud view and the other for its lack of decisiveness.




Once a company establishes a lead in the segment, catching up is never easy. And when that company is Amazon then it is going to be even harder. Amazon and Microsoft are fighting a massive war at the top levels of cloud, pushing each other as they race to keep expanding their base. They keep matching service for service, and trying to out-innovate each other, leaving the competition breathless.

Thankfully, Oracle and Google have enough money on hand to stay in the race for a long time. Oracle’s expertise in database and its growing SaaS business will help them stay relevant in the cloud market, but the catch up task will take many more years of relentless pursuit.

Google is its own enemy because of its own infrastructure needs, which will keep exploding as the company grows. But, now that the company has decided to get serious about their cloud business, we can expect things to change. Hopefully, Alphabet will allocate enough attention, money and resources to building out the data centers, services and features needed to succeed in the cloud game. Microsoft has put a huge hole in Google’s SaaS ambitions around GSuite, and the bigger Microsoft grows in that segment, the more the heat will be on Google to match performance – if it can.




As 2016 becomes a mere memory, we’ve seen what the best can do and what the others must aspire to. This is the state of the business of cloud computing, and the company that is best able to leverage its strengths, form key partnerships, introduce valuable services and relentlessly focus on the customer is the company that will ultimately rule the cloud industry.

At the end of the day, it may well be an oligopoly consisting of Amazon, Microsoft and IBM, but Google and Oracle still have a long shot at competing with the best. For now, none of these companies can afford to rest on their laurels. They must forge ahead and create new business opportunities in what is still, at best, a nascent industry.

Thanks for reading our work! We invite you to check out our Essentials of Cloud Computing page, which covers the basics of cloud computing, its components, various deployment models, historical, current and forecast data for the cloud computing industry, and even a glossary of cloud computing terms.