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2016 in review: the players in the cloud

Run in new year 2017

With 2016 coming to a close, Telecoms.com took the opportunity to see how the worlds’ leading cloud companies performed over the last 12 months, and what their prospects are in 2017.

Jeff Bezos

Amazon CEO Jeff Bezos

The one to catch (still): Amazon Web Services (AWS)

AWS started the year as the front-runner in the cloud computing segment, and has arguably finished in a stronger position, as the clear leader in the market share race.

Back in June, Hotels.com CIO Theirry Bedos spoke at Cloud World Forum where he put forward the idea the normalization of cloud computing would erode the dominance of AWS in the market, and while it is still early days, the cloud incumbent seems to maintaining its lofty position.

Bedos does have a sound theory; as more people look to consume cloud, more vendors will appear, disruptive pricing models will turn up and contracts will be more widely spread. While this is the way most industries have gone following the transition from early adopter to mass market, buyers of the cloud are seemingly continuing to favour the established players.

Some of the latest research from analysts throughout the industry has shown AWS has continued to strengthen its grip on the industry, and the team are not afraid of getting into a pricing war either. The race to the bottom is not something which is usually promoted by market innovators, who try to maintain a premium position against challenges who look to undercut services, but the view from AWS is that there is enough business to go around, and economy of scale is the best means to grow. AWS will continue to make the cloud cheaper, and further democratize the concept of the connected era.

Whether this is a strategy the other major players in this space will try to emulate remains to be seen, however there is only one company worldwide who is on the verge of breaching the milestone of $10 billion annual revenues in the public cloud segment.

Summing up 2016: Starting in the lead and finished in the lead; AWS is still the innovator and the one to beat. Catch up if you can

Dianne Greene

Google Cloud SVP Diane Greene

The one who tried really hard: Google Cloud

Google is one of those organizations which can seemingly do anything it wants. It has the cash, innovative leaders and a brand people trust. But dominance in the cloud computing market has always just out of reach, irrelevant of how hard the team have pushed.

2016 has seen Google throw the sink, fridge, cooker and everything else in the kitchen at the cloud computing segment. There have been acquisitions, the opening of new assets, hiring of industry heavy hitters and expansion to new locations, but it’s not been a smooth ride.

Don’t misunderstand the success of the team however. Google has won new clients, expanded its team and brought in a couple of billion to bolster bank accounts. But for every success story in the Google Cloud business, there seems to be another one for a competitor which is bigger and better. It’s an unusual position for the Google business; successful but not dominant, but it is something which it might have to get used to for the time being.

One area which could prove to be a game changer for the Google Cloud team is its focus on artificial intelligence. The Deepmind team is widely recognized as the leader worldwide for the development of AI, and with the cultural acceptance and technological advancement only increasing, it won’t be too long before AI becomes a major facet of an organizations armoury.

Numerous businesses around the world are striving towards automation of simple tasks to ensure staff can be more effective, though the integration of AI could be a significant shift in removing simple decisions from these staff as well. Whether this materially impacts the cloud segment during 2017 remains to be seen, though the integration of AI into day-to-day life on mass-scale is not that far away.

Summing up 2016: Tried really hard and make some progress in redefining its own business, but didn’t make any ground on market leaders. 2017 could be a different story if AI development continues, and acceptance becomes more mainstream.

Microsoft Azure Satya Nadella

Microsoft Azure Satya Nadella

The one who discovered former glories: Microsoft Azure

Few companies have gone through the rollercoaster ride Microsoft has undertaken through the last 30 years. Back in the 80s and 90s, Microsoft was one of the most dominant brands in the world, with Bill Gates one of the most recognizable faces. Then came the rise of more millennial friendly technologies and the decline of the PC. Microsoft withdrew into the shadows slightly.

Then in 2014 came the appointment of Satya Nadella as CEO and the tides began to change.

Microsoft never really disappeared from our lives but the emphasis was lost. It’s databases and Office suite still dominated the market, but the declining PC market was a blow. Nadella brought a change to the business and put cloud computing at the forefront. The Azure offering had a slow start, but continually gathered momentum, and is now widely considered as the number two platform in the market. It’s put Microsoft in the limelight again, and it doesn’t look like that going to change for a while.

Microsoft it one of those companies which could fall into the bracket of mega-vendor. Through cloud, hardware, social, databases, Office365, Skype and other offerings, Microsoft has managed to infiltrate almost every aspect of enterprise technology. Because of this penetration, a piece of JP Morgan research highlighted Microsoft was the one company which CIOs would struggle the most without. This put it ahead of Amazon, Google, IBM and everyone else.

Microsoft may not be leading the cloud computing battle, but in the wider technology war, it’s certainly making its presence known. And Azure is leading the charge.

This penetration, a strong brand and the success of the Azure cloud platform is now creating opportunities on the fringe which is only strengthening the business. In the AI arena it is making progress with the Cortana suite, a new partnership with TomTom helps it with location-aware IoT devices, LinkedIn takes it into the social market and it’s partnered with Oculus to bring VR to the Xbox. These are only a few examples, but most of them are powered by the solid grounding the Azure cloud business offers.

Summing up 2016: Getting stronger and stronger. Second place in the cloud market isn’t a bad place to be when the breadth of offerings makes Microsoft arguably THE player in the wider technology industry.

IBM CEO Ginni Rometty

IBM CEO Ginni Rometty

The one who’s threatening to make a difference: IBM

IBM has a similar story to Microsoft. Big Blue was one of the dominant forces in the worldwide technology industry from the 70s through to the 90s. Then came the rise of cloud computing and IBM started to slide.

This decline has been widely reported throughout the industry, as each quarterly earnings call brings another consecutive quarter of decreasing revenues. Big Blue didn’t react quick enough to the change in the landscape and now legacy technology is all too common a term associated with the business. But the tides are beginning to turn.

The business is still declining, and while revenues from the legacy offerings will not disappear overnight, they are continuing to decrease faster and faster. But the strategic imperatives unit (cloud, analytics, IoT etc.) is growing quickly, accounting for $8 billion during the last quarterly announcement and cloud brought in $3.4 billion of that number. Strategic imperatives now represent roughly 40% of revenues; Big Blue is starting to turn the cloudy corner.

The majority of this success has been led by Watson, the company’s leading cognitive computing platform, though IBM Softlayer has been making progress as well, separating itself from the chasing pack to put it in the top four cloud providers worldwide. IBM has been chasing the early adopters of next-generation technologies, though it is now starting to make a name for itself as a force in the connected world.

Summing up 2016: Big Blue may not be out of trouble just yet, but the digital transformation journey it has been on is starting to pay-off. Watson is looking like a sound AI platform and the team are pumping out use-cases, but Softlayer is sneakily making a name as a platform to look out for. IBM has been threatening the big-leagues for a while, but it might just be back up there.

Alibaba CEO Jack Ma

Alibaba CEO Jack Ma

The one to keep an eye out for: Alibaba

The top four in the cloud market are set for the moment, and it looks like it would take a major disruption to alter the status quo. That said, Chinese technology companies are making a habit of shaking things up.

In November, Alibaba made its first steps towards disrupting the worldwide cloud market in a story which sounds very familiar.

There is a sound strategy for the Alibaba team to follow in the progress Huawei has made in dominating the worldwide networking infrastructure segment. Huawei is a private company, which found initial success in dominating the domestic Chinese market, developed huge reserves of cash, a very good team of engineers, a culture of innovation and an attitude of dominance. These factors gave it a huge footprint in its home market, and a springboard into the international arena.

Alibaba is part of the way there. It dominates the Chinese market, has a significant amount of cash and with its new data centre in Germany it has the entry point to the rest of the world. Germany was an interesting place to start due to its strict data protection policies, though it sets a high benchmark to further expand into a developing cloud market which is privacy-sensitive.

The company is very much in the early stages for the moment, but if the lessons are learned from the Huawei march to the top of the industry, Alibaba could be a thorn in the side the other cloud players could do without.

Summing up 2016: Didn’t do anything of note during 2016, aside from the last couple of weeks, but has the potential to really shake things up in the worldwide cloud space. AWS, Google, Microsoft and IBM won’t be too worried at the moment, but this is one company definitely worth keeping an eye on. Everyone else should be very worried though.

The one’s that also ran

Oracle seems to be making noises, but with Larry Ellison involved, when is it not making noise. For the moment, that’s all it really is though; noise. One thing which it does have is a significant bank account and its making best use of it, snapping up various smaller players to create vertical specific offerings. Money isn’t everything in the era of innovation, but it does help.

Rackspace is another interesting player, and one which could make a difference in its own little niche. Little is apt for the moment, but the sub-sector of Multi-cloud services has the potential to grow. Following its acquisition by Apollo, the team now have the time to redefine its business model, moving away from its previous focus of managed services, building capabilities to allow it to help companies build a multi-cloud IT methodology which best utilises all available cloud platforms.

Deutsche Telekom is one of many telcos which is making moves into the cloud space, though progress has been shadowed by the success of the technology companies. It does currently have a public cloud offering, and its data guardianship relationship with Microsoft (to put data out of the reach of US intelligence agencies), puts it in an interesting position to move forward.

Salesforce is a company which essentially brought the cloud to the world through its SaaS CRM offering. It brought a simple product to the world through the internet, and redefined how enterprise organizations interact and manage customer relationships. Salesforce is still one of the most dominant players in the cloud space, but from a different angle. Its faced many challengers, but has continued to innovate, and still plays a very important role for businesses around the world.

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