Who's winning the Cloud War?

By Chinnu Senthilkumar, Vivek Pendharkar & Rishabh Bardia

Cloud Computing has gained a lot of attention in the last decade since the launch of Amazon Web Services (AWS) in 2006. Ever since, there has been a fundamental shift in how the software businesses are offering their products & services to the end customers - SaaS, PaaS, IaaS et al. As IT matures, there is a massive shift in Computing business - from CapEx to OpEx, in essence transitioning into a utility model. AWS monopoly is being Challenged Currently the Cloud market is transitioning from a monopolistic market to an oligopoly & has a long tail which consists of many localized & verticalized solutions, which clearly indicates that there will be many acquisitions & inorganic growth opportunities as the tech titans battle it out for higher market share & augment their cloud strategies. Having tracked & invested for a while in this evolving.

Year 2019 has been exciting for the Cloud Computing market & has witnessed a string of significant developments, ranging from large & mid sized acquisitions by the tech titans. IBM’s mega acquisition of Red Hat to get into the open hybrid cloud is a clear indication that, though late in this market, they are looking to catch up with incumbents like AWS & Microsoft’s Azure. Until recently, Amazon was the undisputed king for long but now its dominance is being challenged by the aggressive push by Microsoft & Google Cloud Computing Platforms. Q2 2019 AWS revenues stood at $8.4Bn and grew 36% YoY with highest market share (32%). For the same quarter, Microsoft’s Azure grew faster & picked up further ground in market share as the number 2 player at a 64% YoY growth & has crossed an annualized revenue of $20Bn.

Other Tech Titans are catching up:

While Amazon’s core offering is public cloud, Microsoft is targeting its existing as well as other enterprise clients with its focus on large scalable enterprise cloud solutions. IBM is using Multi & Open Hybrid cloud strategy to upsell to its existing clients & enter newer accounts.  Google has had strong High Performance Computing (HPC) offerings and with their recent multi billion acquisitions (Looker, Elastifile, Velostrata & Alooma) they are improving their cloud capabilities - data analytics, storage & cloud migration, to extend their reach. Microsoft’s recent acquisitions of Cycle Computing, Cloudyn & Express Logic shows their approach to strengthen their platform through multi verticalized solutions. On and above VC community is investing into emerging platforms like Edge computing.

   Figure 1: Cloud Ecosystem & Key Players

Factors driving different types of Cloud Strategies:

CompaniesCore OfferingsCloud Strategy FocusAmazon (AWS)Convenience / Ease of UsePublic CloudMicrosoft (Azure)Enterprise Applications - Security, Recovery & ReliabilityPrivate & Hybrid CloudGoogle CloudHigh Performance ComputingMulti & Hybrid CloudIBMEnterprise Services & Turn Key SolutionsMulti & Open Hybrid CloudAliCloudConveniencePublic Cloud with focus on Asia

Mega trends which are altering the Cloud Computing Landscape:

Data Privacy Regulations & Security: To meet GDPR & other regulatory compliances, enterprises are opting for different cloud strategies - Hybrid Cloud, Multi Cloud et al. Our portfolio company PrimaryIO helps enterprises migrate their workloads from on-prem to cloud in compliant manner & saving costs.

Interoperability: As businesses/enterprises become aware of becoming too reliant on a single cloud service provider, they are taking proactive measures to keep their Cloud strategies agile.

5G, IoT, AR/VR, AV: With the advent of 5G, as IoT, AR/VR and Autonomous Vehicles gain their full potential, there will be an enormous amount of data that will be generated through connected devices, in turn giving rise to the need of shifting & processing the data between edge & centralized cloud data centres. Our portfolio company AkriData helps aggregate, filter and transport large amounts of data from Edge to Cloud for AI pipelines. Another portfolio company Deepvision.io, (headquartered in Silicon Valley & operations in Hyderabad) makes AI silicon for high performance edge computing.

HPC: With newer technologies like AI, Machine Learning, Block Chain, Cryptography growing fast, there will be need of high performance computing.

Emerging Cloud Computing strategies have started to influence the computing infrastructure. For example, many traditional retail CoLo companies (example: Equinix) are re-architecting to meet the surging demand in efficient Cloud Services. Power is becoming critical in the efficient operations of Cloud Infrastructure and our portfolio company Virtual Power System provides platform to maximize power utilization in data centres thus reducing the TCO.

Above mentioned Business and Technology trends are going to drive the evolution of Cloud Computing as the players fight it out to grab a larger market share using different strategies. In this quest we are going to see more acquisitions by large players to augment their capabilities. We also envisage smaller players offering specialized and localized solutions to enterprises will continue to thrive with a significant minority share of the total market.

In the end, it will be the customers (i.e. enterprises that consume IT) that will dictate how the Cloud Wars play out. Data will be the ultimate currency for most enterprises and the ability to control, secure and own your Data - while utilizing IT as a service will drive the industry towards portability and interoperability across clouds while providing for security, agility and cost efficiency.