Amazon and Microsoft to Face Off in Cloud Computing Space
Eliminating data centers
Amazon’s (AMZN) Amazon Web Services (or AWS) has been leading the cloud computing segment. Microsoft (MSFT) takes second place in this space. During 4Q15, both the giants have seen a significant increase in their cloud computing business, as more and more companies are moving their internal software to the cloud. The Fortune 500 companies such as General Electric (GE) and Netflix (NFLX) have already made their move towards the cloud to reduce their data centers.
According to the Wall Street Journal, General Electric (GE) will keep four data centers running out of its existing 34. These four data centers will run the company’s private operations that differentiate it from its peer group and protect its intellectual property from cyber threats. GE’s oil and gas division is already running its operations in the cloud, where half of its core applications are carried out by AWS. Moreover, the company is planning to migrate over 9,000 workloads to AWS over the next three years.
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AWS holds the leading position in the cloud segment
The cloud computing market is expected to rise to $27.4 billion in 2016 compared to $14.9 billion in 2014, according to Synergy Research Group. The majority of the cloud revenues are generated from infrastructure-as-a-service (or IaaS), where Amazon holds the leading position. As the graph above shows, Amazon held the majority share of 36.9% in the cloud computing service market followed by Microsoft (MSFT), Salesforce (CRM), and Oracle (ORCL). These stocks held 8.7%, 4.7%, and 3.4%, of the market share, respectively.
Amazon reported that its sales from AWS rose to $2.4 billion in 4Q15, compared to $1.4 billion in the same period last year. In its 4Q15 conference, Amazon announced that it has around 1 million customers. Out of these customers, many are SMBs who are using AWS to develop and test software.
Microsoft in its earnings for 4Q15 reported that its cloud segment grew by 5% YoY (year-over-year). Had the currency been constant, the cloud unit would have increased by 11%. However, its Azure cloud service sale came in at $6.3 billion, an increase of 140% YoY. Azure is a part of a cloud service provided by Microsoft. Amazon constitutes 5.1% of the PowerShares QQQ (QQQ).