Cloud computing No.1 should be Microsoft, not Amazon

Microsoft cloud

For a basic introduction to Microsoft, I suggest you refer to my other blog article “How Microsoft makes money? Where is the future?

Why cloud computing is so important?

In my book “The Rules of Super Growth Stocks Investing” 2-2, 2-4, 3-3, 5-1, Cloud computing is discussed in several places, because it is so important! The main reasons are as follows:

  • Cloud computing is the operating system of today and future: just like Windows, Linux, OS X, Unix in the past, whoever controls the operating system can dominate the contemporary technology platform. Just take a look at how Apple’s (ticker: AAPL) iOS operating system recently caused the stock price of Facebook parent company Meta Platfroms (ticker: META) to drop 26.39% in one day and as much as 45% from its all-time high (see my blog article at the end of this article), you can understand the power of the operating system.
  • All software development has been changed to cloud-based. Including SaaS, subscription system, mobile apps, streaming media, online games, e-commerce, food delivery… Basically all the software you want has been moved to the cloud.
  • All large enterprises have moved major back-end operations, core computing, to the cloud, and no longer have to pay for hardware, software, or IT staff; this trend has been going on for a few years, and it won’t go back.

What’s market share of each company in the cloud computing?

According to Canalys’ Q3 2021 survey:

  • Amazon’s (ticker: AMZN) market share is 32%, with an annual growth of 39%.
  • Microsoft’s (ticker: MSFT) market share is 21%, with an annual growth rate of 50%, which is the fifth consecutive quarter to maintain a growth rate of more than 50%.
  • Alphabet (ticker: GOOG, GOOGL) has a market share of 8% and an annual growth of 54%.

According to Canalys’ 2020 survey:

  • Amazon’s AWS market share is 31%
  • Microsoft’s Azure market share is 20%
  • Alibaba’s Aliyun market share is 7%
  • Alphabet’s GCP market share is 7%

According to the 2020 global cloud computing market tracking data released by Gartner, the global cloud computing market size reached 64.28 billion US dollars, an annual increase of 40.7%. Amazon, Microsoft and Alibaba Cloud are among the top three in the world.

What’s wrong with these statistics?

Canalys and Gartner are quite credible market research companies with accurate data over the years, and their survey data is not problematic. The problem is:

  • Most media citations are taken out of context, which can lead to misunderstandings.
  • Detailed market research reports are paid, but what we see in the media are public feeds from market research companies, not full reports.

Where is the problem?

Cloud computing mainly includes three parts:

  • IaaS (Infrastructure as a Service): Basic cloud computing: The vernacular is to buy an empty online space from a cloud provider. There is no operating system and no programs. You can install it and build the environment and system you need.
  • PaaS (Platform as a Service): Platform cloud computing: mainly various platforms or operating systems executed in the cloud; for example, the Linux online cloud simulation execution environment provided by AWS and Microsoft.
  • SaaS (Software as a Service): Software cloud computing: For example, the cloud products of various software companies, including Microsoft’s Office 365, Google Workplace, Salesforce.com, and games from various online game companies can be counted here.

Where is the problem with the Amazon AWS cloud?

All the so-called cloud computing we see in the media usually refers to the first IaaS. This is no problem in the early days, because in the early days, it was all cloud services of this type. Basically, as long as manufacturers are willing to spend a lot of money to build cloud centers, they can do it; you can think of it as the earliest services such as GoDaddy (ticker: GDDY). It’s a super upgraded version of cyberspace. The strength of Amazon’s AWS is IaaS. This is also the reason why AWS often has more than 45-50% of the cloud market share in the very early days.

But cloudification has been in place for many years, and now the overall proportion of IaaS has dropped significantly, as customer requirements have become higher and higher, and pure IaaS no longer meets the needs. What the customer wants is that as long as I pay, you can even get me SaaS software and PaaS platform. But Amazon itself is an e-commerce company. After capital investment, PaaS platform solutions can catch up, but SaaS software solutions are almost zero, because it does not sell software, and decent software is not developed in three or five years.

It’s not about money and people anymore. This part is not Microsoft’s opponent. It can’t even spell the letters. Alphabet (tickers: GOOGL and GOOG) also have a lot of software. Moreover, in the long run, SaaS will continue to increase fees. Program and software development need to support software engineers with high salaries, and labor is very expensive. But Iaas will cut the price because infrastructure is more about capital investment, the race for money, and scale can win! That’s why AWS is constantly cutting prices.

In addition to the inherent weakness of SaaS that cannot be improved, Amazon’s own business is full of mountains and seas, and many ten-type customers are business competitors. Who is willing to spend money to subsidize competitors in the market? Therefore, it encountered the same predicament as Samsung’s foundry, competing with customers for business.

There is one more thing Amazon didn’t know before. Now, after years of cloudification, many customers want to switch to its competitor cloud providers. However, Amazon has made a big splash, requiring customers to pay unreasonably astronomical sums of money before they are willing to transfer customer data to other manufacturers’ platforms. This kind of behavior is simply kidnapping customers, and it has taken a big blow to the company’s reputation.

Microsoft’s natural advantage in running a cloud business

These three questions are reflected in the numbers why AWS’s growth rate has stagnated in recent years. Coincidentally, these three major problems of AWS happen to be all the strengths of Microsoft Azure, and of course they are also reflected in the growth of the Azure business in recent years. This one stagnation and one growth, of course, narrowed the gap between the two sides.

Not only that, but even more deadly is that IaaS charges cannot be higher than PaaS, and SaaS is even higher. All of these problems have caused Microsoft to undoubtedly, in the long run, have the potential to replace Amazon as the true king of true cloud computing. Because Microsoft is now the No. 1 global market share of PaaS and SaaS, which are more expensive and difficult to replace, but the demand for IaaS is too high, and after flattening, it is still invisible; And the media will not subdivide for the sake of saving.

Everyone knows that Microsoft has many software products. Now Office 365, Microsoft 365, Dynamic, and LinkedIn are all native cloud products. Even Windows has a cloud version, not to mention that it has a bunch of cloud games. This part will not be discussed in depth here, and will be discussed later when there is a chance.

Microsoft cloud
credit: Softpedia

How is Microsoft doing in cloud computing?

Microsoft has not disclosed the operational details of Azure. Outside estimates, by the end of 2021, Azure’s revenue will be about 60% of AWS’s revenue, compared with 30% five years ago.

Synergy Research announced in the second quarter of 2021 that the global market share of SaaS was 19% for Microsoft, 11% for Salesforce (ticker: CRM), and 6% for Oracle (ticker: ORCL).

In terms of the global market share of PaaS, at the end of 2020, Microsoft’s 26.3% has surpassed Amazon’s 15%.

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