The cloud computing market is growing and offers incredible opportunities for companies wanting to establish themselves as leaders in cloud computing. According to Tech Crunch, the IDC expects the cloud market to more than double in three years, to $195 billion by 2020.
One company that is leading the cloud market arena is Amazon Web Services (AWS). According to Canalys, AWS dominates the market with 33.8 percent global market share while its closest competitors—Microsoft, Google, and IBM—together account for 30.8 percent of the total market. Other smaller competitors include Oracle and Alibaba Cloud.
ZDNet claims that AWS 2016 operating income was $3.11 billion on revenue of $12.22 billion and its annual operating profit was more than 25 percent. Synergy Research Group reported, “While Microsoft, Google, IBM, Alibaba and Oracle all achieved Q1 growth rates that were substantially higher than that of AWS, AWS revenues are still comfortably bigger than the other five combined.” The question to ask is, “Why does AWS still heavily dominates the cloud market niche?”
Head start
Amazon started as an e-commerce company call Merchant.com to assist third-party merchants to build online shopping sites. However, Amazon struggled to develop an organised environment to separate various services. Therefore, the challenge was for Amazon to create a platform useful for third parties. And in 2006, Amazon Web Services (AWS) emerged and shaped the public cloud industry.
Developers used AWS to test and build cool apps. The emergence of AWS came from the philosophy of “virtuous cycle”. The virtuous cycle begins with getting customers, increasing the number of clients, and adding more servers and features. When AWS adds more servers and features, customers enjoy lower prices and AWS gains even more customers.
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John Dinsdal, chief analyst at Synergy Research Group, stated: “AWS was essentially the first to launch” and “made the market its own” before other giant companies launched similar services. Although companies, such as Microsoft and Google, experimented in cloud technology, they treated cloud services as a fad and failed to use their resources in project development. Even though Microsoft launched its platform Azure in 2010, it is because of AWS’ quick initiative that it’s a prominent leader that still rules the cloud market.
Price drops
AWS remains the leader in the cloud market also because of its constant price drops. According to a MarketWatch, “AWS has cut prices more than 50 times since its launch in 2006″, and SunTrust Robinson Humphrey analyst Kunal Madhukar said he “wouldn’t be surprised if further price reductions were coming shortly, following recent cost cuts for Microsoft’s Azure.”
Since AWS launched in 2006, it maintains its cloud market lead due to the aggressive investments it makes to expand its network. The more network expansion AWS experiences, the greater economies of scale that enable them to offer customers lower prices and full-bodied enterprise-scale features. And remember the virtuous cycle? The increasing number of clients that AWS gains allows more funds to be allocated to network expansion and results in price cuts. These price cuts translate to competitive service.
Although rivals such as Microsoft, Google and IBM had higher Q1 growth rates than AWS, according to the Synergy Research Group, it is important to remember that it’s easier to grow from a small number of customers that to increase from a big number of clients. According to TechCrunch, “While AWS might not have the eye-popping growth percentages of its rivals, it still grew at a decent 47 percent, with earnings of $3.53 billion on an astonishing $14.2 billion run rate”.
New infrastructure and innovations
Remember how AWS began in 2006? It started as an infrastructure platform to enable developers to build and test new apps. Then, there was proven the success of the virtuous cycle customer base. AWS has more than 1 million users including big name companies such as Netflix and Airbnb. Because of the massive customer base, AWS has better visions than almost any vendor into how customers use cloud services. Therefore, AWS stays abreast of creating new infrastructures and innovations to meet its customer needs as well as supporting AWS around the world.
Since 2006, AWS has progressed into a platform for databases, developer apps, tools, and analytics. According to MarketWatch, Amazon “recently announced plans to open an infrastructure region in Sweden in 2018, joining the 16 regional operations it currently maintains around the world, with another two slated to come online later this year.” AWS’ ability to innovate change goes beyond computing and storage. AWS has built a full-featured platform of services that has currently given the company a competitive edge as the leader of the cloud service.
But while AWS has the lead, its rivals such as Microsoft and Google, are also fast growing and making a place in the market with their revolutionary machine learning platform and artificial intelligence (AI). According to Seeking Alpha, AWS seems to be behind its competitors when it comes to AI. Artificial intelligence is one of the fastest growing areas in cloud computing. Because of the massive amounts of data needed for AI, there is a race to reap the enormous rewards in the future.
Fast and easily scalable solutions
AWS provides quickly and easily scalable solutions for its customers. According to thenextweb.com, AWS has the following strengths:
- Diverse customer base
- Broad range of strategic adoption tools such as native cloud applications and e-business hosting
- Large tech partner ecosystem including software vendors that integrate their solutions with AWS
- Extensive network of partners that provide app development expertise managed service, and professional services such as data centre migration
- Rich array of IaaS and PaaS capabilities
- Rapid service offerings and higher-level solutions expansion.
So, having huge capacity gives AWS opportunities to find solutions for its business challenges. Companies can use AWS auto-scaling to match their load demands instead of having to maintain capacity for top loads in traditional data centres. By using AWS auto-scaling, companies adjust the number of servers added or remove them depending on the load. Auto-scaling also helps companies detect when a server is unstable, then terminate it, and launch another server to replace the unstable one. So, the advantages of using AWS offers companies vast solutions for their different needs under one shelter.
It is no surprise that AWS still dominates the cloud computing market because of the services it offers its customers. Even though AWS’ rivals such as Microsoft, Google and others achieved higher 2017 Q1 growth than AWS, Amazon’s quick initiative in its early years, price drops, improvements in infrastructure, constant innovations, and fast and easily scalable solutions still make the company the leader in cloud computing.
However, companies such as Microsoft and Google are making gains in the market with artificial intelligence and machine learning platforms. For Amazon to remain as the frontrunner for cloud services, they must be fast and innovative when implementing platforms for artificial intelligence as they were in their early years. It is going to be interesting to see what Amazon will do to keep its competitive edge in the cloud market wars.
Josh McAllister is a freelance tech writer and business consultant based in New York. In his free time, he enjoys all things geeky and gadgetry, the outdoors, and spending time with his family.