Is Amazon losing its grip on the cloud?



There have been a number of stories recently about IBM, Microsoft and others making big pushes into the cloud space and some see it as a sign that Amazon might be losing its grip.

In a recent commentary on InformationWeek’s website Charles Babcock took on the many rumors and stories about Amazon’s ‘slipping grip’ on the cloud. As he posted, “InformationWeek recently posted a story headlined Microsoft, IBM Gain On Amazon Cloud, based on analysis by Synergy Research that IBM and Microsoft are now growing faster than Amazon in cloud services.”

But Babcock doesn’t see these stories as proof positive that Amazon is going anywhere but up.

These conclusions were reached shortly after Amazon reported a less-than-stellar second quarter: "Sign of stress or just business as usual? AWS sales are off slightly" read a July 24 GigaOm headline. In fact, Amazon's sales in the second quarter were down 3% over those of the first quarter. Compared to the same quarter last year, however, they were up 38%. Hmmm...

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Babcock also goes on to point out that the 38% year-to-year increase in sales came at a time when Amazon drastically reduced prices.

First, Amazon's cloud revenues increased in the second quarter, despite drastic price cuts in March. The cuts were so deep, in fact, that I'm surprised the company is showing the revenue growth that it did. Think about it -- how much new business do you need to win to show 38% growth after dropping prices between 35% and 65% across various services?

The fact is, Amazon's destiny in the cloud is in its own hands, which is more than you can say about IBM, Google, or even Microsoft. I can easily believe Microsoft is growing faster than Amazon as an IaaS provider percentage-wise, because it has a smaller base that's easier to grow in percentages than Amazon's.

TGDaily contributor Massoud Marzban, VP of Business Development at Burnside Digital (an Amazon AWS Preferred Developer) agrees. “Even though there have been stories about recent successes that other cloud services providers have announced, Amazon is still at the top. Burnside Digital will continue to develop solutions based on AWS products and services, primarily because they are better equipped to serve our customer's needs."

Babcock goes on to point out that even though Amazon lost a few major clients like Dropbox, Instagram and Dropcam, these were the results of those clients being purchased by cloud competitors like Google and Facebook. “My view is that if Amazon's competitors have to buy an Amazon customer to get it to switch, Amazon is probably going to be OK. For each Instagram, there are a dozen future Instagrams that just decided to build their business on Amazon,” said Babcock.

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He concludes:

Worrying about Amazon's future in the cloud is like worrying about the future of sand in the Sahara -- and just about as rewarding. The only party that can really hurt Amazon in the cloud is... Amazon. And right now, the company is continuing to add customers while also making it extremely difficult for competitors to move beyond their standing customer bases.

I have to agree with Babcock. AWS has been and will continue to be a major player in the cloud space. They continue to improve their offerings, reduce prices and attract new customers. In my opinion Amazon continues to make the right decisions and will likely continue to do so going forward.

You can read Charles Babcock’s complete article here.



Guy Wright

Guy Wright has been covering the technology space since the days when computers had cranks and networks were steam powered. He has been a writer and editor for many of the most influential publications over the years – publications that helped shape our current technological zeitgeist. He has lost count of the number of articles, blogs, reviews, rants, and books that he has published over the years, but he hasn’t stopped learning and writing about new things.


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