might seem to have a comfortable lead in the cloud. It isn’t taking any chances, though—particularly considering its crosstown competition.
Analysts note that some of the new services Amazon’s AWS business announced last week at its annual re:Invent conference seemed aimed at competing offerings from
Most notable was a service called AWS Outposts, which is designed to allow companies to use Amazon’s services within their own private networks as well as on Amazon’s public cloud network.
This approach—commonly called “hybrid cloud”—is widely considered to be the most important segment of the fast-growing cloud-computing market. Many large companies are hesitant—or legally unable—to move all their computing needs to public cloud networks such as Amazon’s. This is a key area of strength for Microsoft, partly because of the company’s long history in the enterprise software business. A recent survey by
found that 44% of chief information officers considered Microsoft the most important vendor in the hybrid cloud market. Only 25% said the same of Amazon.
That disparity hasn’t seemed to hurt Amazon’s cloud business. AWS generated $23.3 billion in revenue for the company during the 12-month period ended Sept. 30, up 46% year over year. That is nearly three times the $8.8 billion analysts believe Microsoft’s Azure service generated over the same time, according to consensus data from Visible Alpha. But Microsoft has been closing that gap; Azure revenue was 40% the size of AWS in the most recent quarter compared with 25% two years ago.
Microsoft’s exposure to the cloud market also goes well beyond Azure. Commercial versions of its Office 365 and Dynamics 365 applications, when combined with Azure and LinkedIn, brought Microsoft’s total Commercial Cloud revenue to $8.5 billion in the most recent quarter, compared with the $6.7 billion Amazon generated through AWS during the period.
Amazon’s share price jumped 13% during last week’s conference. Several analysts said that the latest offerings should help the company better compete against Microsoft. But Microsoft’s shares have risen steadily this year as well, and the two companies’ respective market values are now less than 1% apart. When it comes to competing in the this hotly contested growth market, the two aren’t as far apart as many think, either.
Write to Dan Gallagher at firstname.lastname@example.org