In the COVID-challenged quarter ended June 30, Google Cloud continued to be the fastest-growing major cloud vendor as its 43% revenue-growth rate was much higher than those of its much-larger rivals.
That marketplace dynamic here in mid-2020 triggers four thoughts:
- Although Google Cloud should certainly be commended for growing much more rapidly than its primary competitors—for Q2, Microsoft’s commercial cloud growth rate was 30%, Amazon’s AWS unit grew at 29%, and IBM’s at 30%—that’s almost to be expected, because Google Cloud’s revenue is much smaller. For the 3 months ended June 30, the enterprise-cloud revenue for Microsoft was $14.3 billion, for Amazon $10.8 billion and for IBM $6.3 billion. (On my weekly Cloud Wars Top 10 rankings, Microsoft continues to be #1; Amazon #2; Google #3; and IBM #7.)
- At the same time, the extremely fast-paced and turbulent cloud business is all about what will happen in the future, rather than what has been achieved in the past. And no one is more aware of that than Google Cloud CEO Thomas Kurian. He offered this perspective in a piece I wrote earlier this year called Google Launches New Era in Cloud with AI-Powered Industry Solutions:
And finally, Kurian emphasized that because the cloud industry has changed, is changing, and will continue to change at a blistering pace, it’s wise to look at the market as it is becoming, rather than as it is.
“Today, where people want cloud to be is not about [infrastructure and packaged apps]. It’s really about, ‘can you give me new capabilities that I could not get before?’ So, we’re very focused on executing our plan. Lateness, earliness, I don’t worry about that,” Kurian said.
“We don’t get distracted by anybody telling us about where we are in the market. We’re focused on executing. When we win customers, they say what we’re offering is truly unique.
“And we don’t think that the way cloud and the market looks 3 years out will be the way it does today.”
- For each of these astoundingly large and influential companies that are among the 5 most-valuable companies in the world, the cloud has become the growth leader across their wide-ranging businesses. While the COVID-19 crisis has temporarily knocked AWS from its longtime perch as the fastest-growing business within Amazon, I would expect that it won’t be long before AWS reclaims that top spot. Over at Google parent Alphabet, while the company’s overall revenue actually declined by 2% for the quarter, Google Cloud was a huge factor in keeping the decline from being much larger.
- And then there’s IBM. While it has struggled over the past few years to clearly position itself in a differentiated fashion in this wildly competitive market, IBM’s cloud Q2 revenue jumped 30%. Putting aside all questions about IBM’s direction and the beneficial accounting results of how IBM can report Red Hat’s revenue contributions, here’s the unassailable fact: right here and right now, IBM has a cloud business that is twice as large as Google’s and is growing as fast as Microsoft’s cloud business and faster than Amazon’s.
So as we look ahead, what significance should we attach to Google Cloud’s position as the growth champion among the cloud leaders?
First off, we all need to remember that no one owns first place. Those in the top spot have a temporary lease, not a deed, and that lease can be cancelled at any time.
Second, the scale of the Cloud Wars Top10 has become massive. Look at these annualized run rates for some of the cloud leaders: Microsoft, $57 billion; Amazon, $43 billion; Salesforce, $20 billion; Google, $12 billion; SAP, $10 billion; Oracle, probably about $9 billion; and IBM, $25 billion.
To continue boosting those numbers, every one of those tech giants will need to invest more capital, innovate more rapidly, attract more world-class talent, dazzle customers more deeply and align their technologies and insights more tightly to the wants and needs of business customers.
And above all, they must remember the words of Google Cloud CEO Thomas Kurian, the Cloud Wars CEO of the Year for 2019:
“We don’t get distracted by anybody telling us about where we are in the market. We’re focused on executing. When we win customers, they say what we’re offering is truly unique. And we don’t think that the way cloud and the market looks 3 years out will be the way it does today.”
Disclosure: at the time of this writing, Google Cloud and Microsoft were among the many clients of Cloud Wars Media LLC and/or Evans Strategic Communications LLC.
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