Amazon Web Services (AWS) practically invented and matured the public cloud over the last decade or so with innovative products and services. Not many organisations would have considered Microsoft Azure a serious cloud option a few years ago; AWS was the clear market leader with a very large market share in the public cloud space and was winning most of significant new business as well. Fast forward to 2017 and although AWS is still the market leader in terms of market share, Azure is taking the honours in terms of growth, growing at almost twice the rate of AWS on a similar scale of revenue.
Over the last few years, Azure’s functionalities have developed significantly to the extent that they are now toe to toe and head to head with AWS on most base IaaS and PaaS offerings. There is not much separating these platforms in terms of pricing as well, leaving only a few but critical factors that could influence who will eventually emerge on top of the nebula.
Some of these critical factors include the company’s strategic intent towards cloud, market approach, influence on next wave of cloud customers, ease of migration, availability of localised options and SaaS products that fulfil higher level business functions. It is quite conceivable based on these factors that Azure will be able to grab the market share lead from AWS in the medium to long term.
Microsoft’s strategy and track record: Microsoft has seldom been a first mover and early leader in areas it has eventually become the leader in. Right from Windows operating systems to productivity and middleware software, once they saw the potential in a market segment they had gone aggressively behind it with a clear strategy to eventually dominate that segment.
In a similar approach, they have now seen the potential with cloud and are pursuing it with a clear and aggressive strategy and unlike other older tech giants like IBM, Cisco and Oracle have been able to execute on the strategy with a lot of success. This strategy is based on cloud first delivery model across most of their traditional products and is giving Azure a big leg up against AWS.
Multi-channel market approach: Microsoft have approached the cloud market with a hybrid sales model with both direct and partner based channels unlike AWS, who are mainly selling directly to their customers. With the extensive partner network Microsoft has built up in the last several 20-30 years, reaching virtually every single computer user, their market approach strategy is much more potent than any other competitor’s. Joining this with the right cloud functionality and pricing, is giving Azure the right momentum for market leading growth.
Deeper customer relationships: As the cloud market is maturing with the early adopters already on-board, the next wave of growth for cloud will come from late adopters like Government organisations, small and medium sized businesses and large organisations whose legacy infrastructure needs to be refreshed. Microsoft with its deep-rooted customer relationships and partner network with these customers, is best placed to reap the benefits of this wave of cloud adoption.
AWS does not seem to have such strong relationships with the next wave of cloud adoption customers putting them at a distinct disadvantage relative to Azure.
Richer SaaS ecosystem: While base IaaS and PaaS offerings are comparable across Azure and AWS, Azure has a clear advantage of having some superior SaaS offerings within its product portfolio. Office 365 and Dynamics 365 are independently leading Microsoft’s charge in the SaaS market for productivity, collaboration and CRM; being part of the Azure ecosystem called Microsoft’s ‘Intelligent Cloud’ these products as they gain market share are helping Azure move towards and consolidate its leader position in the cloud market.
On the other hand, current AWS’ SaaS offerings barely scratch the surface with only basic options like email and productivity tools available as SaaS offerings. However, it is to be seen how their contact center offering, Amazon Connect, when rolled out globally will impact AWS’ cloud platform growth.
Deeper customer environment integration: With the next wave of cloud adoption coming from customers who have significant on premise and legacy infrastructure, they will look for ways to reduce operational risk during workload migration. Similarly, customer who pursue a hybrid cloud strategy will want deeper integration between their on-premise and cloud infrastructure.
Azure provides multiple migration risk mitigation and cloud integration options including hybrid and on-premise IaaS and PaaS offerings for popular databases and middleware like MS-SQL and IIS. This will provide customers more confidence for both migrations and hybrid options and will strongly influence their cloud platform decisions.
Although AWS provides tools to support cloud migration and hybrid clouds, they do not provide the seamless options that Azure provides.
More Data Centres: Although going into a cloud is meant to provide location independent flexibility for organisations, ground realities relating to performance, disaster recovery, security and regulatory compliance mean customers still prefer cloud providers that provide better options with local data centres. Azure’s DC footprint is already almost twice that of the AWS DC footprint allowing it to be scored high in these aspects. This will also allow Azure to scale up their cloud offerings rapidly in comparison to AWS as their customer volumes grow.
What AWS can do?: The key to AWS maintaining its market leader position would be to effectively reach the next wave of cloud customers with higher business value offerings. One option would be for them to partner with or buy organisations with deep customer relationships like IBM global services. They could also acquire companies like Salesforce and Adobe to bring SaaS level richness into their cloud ecosystem.
As the next wave of cloud adoption comes through it will be interesting to see if AWS would hand over the crown to Azure or if it would fight hard to keep it. Time will tell.