Is Amazon becoming the Microsoft of cloud? Hold that thought

Is Amazon becoming the Microsoft of cloud? Hold that thought

Summary: New report predicts Amazon Web Services will rule the enterprise world in 10 years. We'll see.


A Morgan Stanley report predicts Amazon Web Services will reach $24 billion in annual revenue within the next decade, and will be the defacto IT shop for... everybody. 

Clouds over Earth-photo by NASA VisibleEarth site
Photo credit: NASA,

In a post at Barron's, Tiernan Ray shares some details of the report, which predicts that between 3% and 17% of traditional IT spending could be going to AWS by then.  In total, the report's authors see the enterprise cloud space as a $152-billion market by then.

The Morgan Stanley reports make the following predictions:

  • On-premises server growth will slow because of the cloud. (Inevitable, yes. But cloud providers themselves still need to buy servers. Morgan Stanley predicts 20% growth in servers for this sector.)
  • Private clouds will also eventually be migrated to AWS, creating "headwinds" for the virtualization market.
  • Storm clouds on the horizon for IT outsourcing as the cloud model gains traction. (Outsourcers are recognizing this, and getting into the cloud game themselves. IT outsourcing may actually grow, but will grow as smaller cloud service engagements, versus big data center management deals.)

The AWS model is extremely compelling. I'm aware of a company that was able to launch its business with a monthly IT bill of $80, covering a range of processing and storage services. That's huge.

But anyone that's been following the IT space long enough is familiar with the never-ending string of predictions of one company or one technology type taking over the world.

IBM ruled the IT world in the 1960s and 70s, selling mainframes into most of the digitized world at that time. It was accused of being a monopoly.

Then the paradigm shifted away from back-end computers and terminals and toward PCs back in the 1980s and 90s, many vendors rode the wave, but a single company, Microsoft, ruled the PC realm -- to the point where it was being accused if being a monopoly. But the ground keeps  constantly shifting beneath the technology world, and whatever "monopoly" Microsoft had during this run has been draining away into the cloud and mobile space. In recent years, Apple eclipsed Microsoft, with hegemony over the mobile space. But that is being encroached upon by Android-enabled players (Microsoft itself isn't going down without a fight here, either.)

And IBM remains a giant in the game, with a lot of cloud centers, programs and capabilities it is extending to its huge enterprise base.

And, oh, by the way, there's also Google, which also has its eye on the enterprise cloud space, and is even willing to provide lots of services at no cost.

The bottom line is no one is going to get into a $152-billion market space without the fiercest competition imaginable. There are a lot of choices, and that's good news for customers. Ten years is a long time off, and something we haven't even thought of yet may emerge at that point. Besides, if someone does monopolize the space in a big, overbearing way, well, government regulators on both sides of the Atlantic are likely make being the sole cloud provider to most of the world's businesses may be more trouble than it's worth.

Topics: Cloud, Amazon, IT Priorities

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  • Neglecting one very important factor

    Amazon's business model is built on razor thin margins that few competitors can stomach. Dell already exited recently.

    The upshot is that Amazon will grow very quickly and gain economies of scale advantages that other competitors will not have.

    I would NOT bet against Amazon in this game.
    • In other words

      ...they're not earning any substantial money to re-invest on that one. Plenty of players could invest whatever Amazon can, and most of them have a better reason to stay in this market - even at a slight loss. I would definitely bet against Amazon being the sole provider ("de-facto IT shop for everyone"). In terms of IT ecosystems, Amazon has a lot more gaps to fill than Microsoft, Apple, and Google, and a lot less incentive in making this a make-or-break part of their overall corporate strategy. I have no doubt it's important to them, but it is more important to Microsoft, for instance.
      • 25 analysts disagree with you apparently

        I did not say anything a bout "sole provider", but at some point, someone will probably become dominant.

        Clearly, Amazon makes enough money to stay in this business. Why did Dell leave? Perhaps they thought the required capital and effort could be put to better use elsewhere. Do you think MS will be happy with Amazon margins? Even if Ballmer decided to accept that, there are shareholders to deal with. Bezos' shareholders mostly understand and support his business model. The same can probably not be said about MS's shareholders. They have suffered quite a bit already over the past decade.
        • Sole Provider

          I felt the article was suggesting that. My main thought is that Amazon is in the business of "selling stuff" and can sell web services or not, and still have a business. Microsoft, on the other hand (don't care much about Google, so I'm not analyzing their business model that much), is in the IT services and devices business and just about can't afford for Azure to not be a pretty big success, and so they'll keep trying, and throwing at it what they must. All of which doesn't mean that Amazon may not be highly successful. I just don't see them becoming "the de facto IT shop for everyone."
        • Just 25 analysts, out of how many?

          If there were only 25 - 30 analysts in the world, I'd agree.

          But I've not read "100% analysts agree that Amazon will be the de facto IT shop for everyone."

          The simple fact is that at one time, IBM and Unisys were the "de facto IT shops for everyone". Oh, how times have changed.

          Oh, and what happens when AWS becomes that monopoly? We know you loathe monopolies. ;)
          William Farrel
        • Did you read the synopsis.

          "A Morgan Stanley report predicts Amazon Web Services will reach $24 billion in annual revenue within the next decade, and will be the defacto IT shop for... everybody. "

          Sole provider and I strongly doubt it. Amazon is a company I question will be able to stay in business in the long term. Their accounting of AWS is a gimmick at best claiming all AWS is 100% profit because they sell excess capacity. They fact they invest billion to "create" capacity they do not need is never asked in conference calls. They provide a decent service but it is 100% dependent on continued sales growth of retail products to support it. If that slows down, AWS will collapse.

          As for betting against AMZN stock? suicide.
          As for going long? Not when I think the stock is worth $20/share at best.
        • You're joking. Right? Just because someone in a major bank makes

          a prediction, you think it must be true, or will become fact?

          Fact is that, it's just a prediction, and in this case, wishful hoping, since they're probably invested in seeing Amazon succeed. Remember how "a bank" went gaga over Facebook and made that stock price go higher than it should have?

          Never trust a banker, especially when they're making predictions. No bank or analyst for a bank should be in the predictions business. It's like a local fortune-teller telling you that, Amazon is where to put your money, or your business. Could end up being very wrong, and you will have lost your money.
  • Amazon is a no-show in the private cloud space

    MSFT and VMWare are happy collecting that part of pay checks. Also notice AMZN has no own virtualization stack - a space that MSFT and VMW again dominate. AMZN does a good job collecting the low hanging IAAS customers but it's fairly naive to think cloud is all about IAAS. There's plenty money to make in the PAAS and private cloud space, and AMZN is not doing much over there yet.
  • Poor writing, good point

    "Hegemonity"? Please. Hegemony is the word you were looking for. That kind of lapse aside (you really could benefit from a remedial writing class), I think your premise is correct. A prediction for supremacy by Amazon in a field where they have as yet no significant presence, as against Microsoft and Google, who not only have a significant presence in the cloud already but have far more money to invest in developing their business there than Amazon does - well, that prediction is obviously nothing more than link bait. Just as obviously Morgan Stanley has too many analysts on staff with too little real work to do, so they're pulling reports out of their nether regions in a desperate effort to justify their existence.

    The fact is that web services are as yet in their infancy. The cloud paradigm can be expected to shift many times in the nest ten years. Any prediction by anybody about where that business is going and who is going there is prima facie evidence of incompetence. If Morgan Stanley paid even a grain of salt for such a report they were over-charged.
  • Amazon and google

    From what I read, Google uses the storage of Amazon for their cloud (can anyone confirm this?). So if we are talking PUBLIC Clouds, it stands to reason that if Amazon's competition is using Amazon for storage, it is still a WIN for Amazon. So, who owns the PHYSICAL disk where your Google Docs document resides? I personally don't use public clouds as I have work withing HIPAA and CJIS rules and we are not allowed to have 3rd party employees who are out of the country see our data.
  • Poor to Zero Research

    Quoting Morgan Stanley on tech is very disappointing, even if their source was primary research the conclusions are mundane and uninformative. Bullet points 1 and 3 are well known, while point No. 2 is mere conjecture - "Private clouds will also eventually be migrated to AWS, creating "headwinds" for the virtualization market." - why AWS? No further rationale is given. To get to a clearer basis for forecasts, more detail needs to be provided - as for example this post which calls out names that are relatively unknown. cloud provider .
    There will be no monopoly - the spoils will be divided between Amazon, Google and Microsoft because they have a complete vision for the Cloud.