Can Amazon, Google or Oracle Replace Microsoft as World’s #1 Cloud Vendor?

Satya Nadella
Satya Nadella

Can Amazon, Google or Oracle Replace Microsoft as World’s #1 Cloud Vendor?

CLOUD WARS RANKING

#1

CEO

Satya Nadella

QUARTERLY CLOUD REVENUE
AS OF NOV. 30, 2020

$15.2 billion

Microsoft is surging into 2021 with a very good chance to generate $70 billion in cloud revenue for the calendar year.

That would make Microsoft’s cloud business—not the whole company but just its enterprise-cloud business—larger than all but about 50 of the world’s biggest corporations.

A cloud business with more revenue than that of corporate icons Disney, Procter & Gamble, and FedEx.

A cloud business almost 50% bigger than American Express, and one-third larger than Wall St. titan Goldman Sachs.

And I will contend that the primary reason for that astonishing success is not the company’s sprawling and highly innovative cloud technology—although that’s certainly a huge factor—but rather Microsoft’s willingness and ability to transform customers into long-term strategic partners.

Indeed, the magic behind Microsoft’s extraordinary success in the cloud has been its ability to help corporate customers modernize not only their “digital estates,” as CEO Satya Nadella calls them, but also their business models, their competitive postures, and their strategic visions.

So if any of the other superb companies on the Cloud Wars Top 10 has designs on unseating #1 Microsoft from its long-time spot atop my weekly rankings, they had better be able to weave together at least the following:

  • superb cloud and on-premises technology;
  • flawless customer-success programs;
  • deep vertical-market expertise;
  • salespeople as technologically fluent as most of their customers;
  • a vast array of partnerships to ease customers play in a multi-cloud world;
  • CEO-level commitment to selling digital transformation instead of tech products;
  • strategic vision to help companies ambitiously create their own futures; and
  • the confidence to stay focused on the world as it is becoming, and not just on how to try to meet quarterly expectations.

With that as our backdrop, let’s take a look at Microsoft through the 5 lenses I’m deploying throughout this Cloud Wars Top 10 Special Report: Opportunities, Challenges, Unique Differentiation, Leadership, and Big Questions.

Microsoft’s Unique Opportunities

Microsoft

In the Cloud Wars, you can’t fully exploit opportunities unless you’re willing to be at least aggressively ambitious and sometimes even downright audacious in setting objectives. And in Satya Nadella’s 7 years as CEO, one of his most valuable and transformative achievements has been his breathtakingly ambitious engagements with big global customers.

Transcending the transactional

Sure, it’s always great to make a process 3% faster or to lop off a few nickels in extraneous costs here and there. But in pushing his team to transcend the transactional and instead drive for the transformational, Nadella has made Microsoft into a shaper and reshaper of not just companies but of entire industries.

And that remarkably bold positioning is at the heart of Microsoft’s biggest opportunity: to deploy its vast array of technologies and capabilities to help companies remake themselves and their capabilities for the digital future.

FedEx and Novartis

Here are a couple of examples.

In May, as described in #1 Microsoft and FedEx Pair Up to Revolutionize How Business Is Done, Microsoft and FedEx joined forces to do something far beyond delivering packages a bit faster or a bit less expensively. Instead, they set out to create “multiple joint offerings powered by Azure and Dynamics 365 that will use data and analytics solutions to reinvent the most critical aspects of the commerce experience and enable businesses to better compete in today’s increasingly digital landscape.”

As the headline says, FedEx believes that in close partnership with Microsoft, it can “revolutionize how business is done.” FedEx could have picked any tech company in the world to be its partner for that adventure—and it chose Microsoft.

In the introduction section above, I mentioned the remarkable relationships Microsoft has managed to create with many of its major customers, and certainly this FedEx “partnership” is one of those. And in that context, it’s important to bear in mind that the unprecedented “Surround” service will be only the first product of the Microsoft-FedEx collaboration. As I write in the article cited above, “while the sweep and ambition of their plans is breathtaking, it’s important to remember that FedEx Surround is only the first installment of their deep and broad collaborative partnership.”

The AI Innovation Lab—and Reimagining Medicine

Another example of the deep-level fusion of Microsoft technology with a customer’s ambition is the joint effort by pharmaceutical giant Novartis and Microsoft to do nothing short of reimagining medicine. Going far beyond the traditional model of “you give me some money and I’ll give you some technology,” the Novartis-Microsoft collaboration was centered around the creation of an AI Innovation Lab that would fuse the richest capabilities of each company to achieve something the world desperately needs: better and safer molecules and medicines in shorter periods of time. From my September article called Medical Moonshot: How Novartis and Microsoft Are Using AI to Reimagine Medicine:

“At the heart of that visionary collaborative effort is the fusion of expertise in deep scientific know-how from Novartis, with AI and data management expertise from Microsoft. On top of all that world-class domain expertise, leaders within both companies say, the other essential ingredient is culture: can the Novartis and Microsoft teams transcend the traditional dynamic of tech vendor and business customer to achieve outcomes that neither company could ever accomplish individually?”

Exemplified by these bone-deep partnerships with FedEx and Novartis, this is Microsoft’s big opportunity for 2021: forging alliances with customers—or are they better described as partners?—at a level of technological and cultural depth that other tech vendors simply can’t match.

Microsoft’s Challenges

Azure

I’ll outline 3 big challenges that I see for Microsoft in descending order of priority.

a. Azure Reliability

Some say we’re in the early stages of the “experience economy,” so maybe you have to be one of the world’s handful of hyperscalers to be able to truly comprehend this recent addition to the experience-economy literature: Advancing the outage experience—automation, communication, and transparency.

That is the actual name of an August 2020 blog post from Azure CTO Mark Russinovich, and here’s the one-sentence descriptor of that post: As part of our Advancing Reliability blog series, we’re outlining the investments we’re making to continue improving the outage experience.”

Okay, so I get the idea: outages are truly awful so anything that can be done to reduce that awfulness is—or at least should be?—a positive. So I understand the intent of Russinovich and the Azure team in their efforts to “advance the outage experience.”

Don’t advance the experience—eliminate the outages!

But really—if a global business is considering putting its most essential workloads on Azure, wouldn’t that prospect want Microsoft to eliminate outages rather than “advancing the outage experience”?

On the flip side, under the leadership of Russinovich, Microsoft has been much more transparent about the issue of Azure reliability and dependability. That’s commendable and needs to be continued. But the very existence of a campaign such as this one is a sign that the Azure team, for all of its outstanding accomplishments, still has a very long way to go before enterprise customers are fully comfortable. Here at Cloud Wars, we first started tracking this issue back in January with Microsoft Tackles Top Challenge: Boosting Azure’s Reliability and we’ll continue to watch it closely in 2021.

 

b. Balancing IaaS Achievements and SaaS Aspirations

It’s great that Microsoft plays at all 3 layers of the cloud—IaaS, PaaS, and SaaS—because that gives it the chance to address more issues and opportunities for customers.

At the same time, to do so successfully in 2021 and beyond will require an exquisite balancing act between partnerships with other tech firms and the very healthy growth ambitions that all great companies have.

So here’s what Microsoft has to balance: on the one hand, lots of big global customers want to move their big on-premises workloads—primarily SAP but also lots from Oracle and others—to the cloud. And Azure has built a large and thriving practice for helping those customers move those workloads and applications to Azure. It all usually works well, and everybody’s happy.

But, on the other hand, Microsoft’s also built a high-growth $2-billion SaaS business around Dynamics 365 enterprise applications. So just how exactly will Microsoft avoid having Dynamics 365 become a competitor to the new generation of SaaS apps—including ERP—from SAP and others? Particularly as Nadella refers to how much different and better Dynamics 365 is from those “monolithic” enterprise apps of the past?

This is by no means an existential crisis for Microsoft, but it’s also a head-on fight that Nadella and team would likely rather avoid.

 

c. Can Microsoft Keep Satya Nadella Challenged and Happy?

Someone might say that’s a foolish question: after all, if you’re CEO of Microsoft, what other job could possibly be as interesting, motivating and stimulating?

But consider this: Satya Nadella is 53 years old and 28 years ago he joined Microsoft at the age of 25. Almost all of his adult life has been at one company. There’s not a darned thing wrong with that—it is in every respect an extraordinary story. But to become CEO of Microsoft, and to then achieve the remarkable levels of success that Nadella has achieved requires a supreme intellect; passionate energy, commitment and devotion; and a restless spirit that will not settle for anything less than the absolute best.

And my question is this: can any company, including Microsoft, continue to meet and exceed the imagination and spirit of someone like Nadella, who at the still-very-young age of 53 could be many measures be considered as the world’s top CEO?

Microsoft

Microsoft’s Unique Opportunities

In the Cloud Wars, you can’t fully exploit opportunities unless you’re willing to be at least aggressively ambitious and sometimes even downright audacious in setting objectives. And in Satya Nadella’s 7 years as CEO, one of his most valuable and transformative achievements has been his breathtakingly ambitious engagements with big global customers.

Transcending the transactional

Sure, it’s always great to make a process 3% faster or to lop off a few nickels in extraneous costs here and there. But in pushing his team to transcend the transactional and instead drive for the transformational, Nadella has made Microsoft into a shaper and reshaper of not just companies but of entire industries.

And that remarkably bold positioning is at the heart of Microsoft’s biggest opportunity: to deploy its vast array of technologies and capabilities to help companies remake themselves and their capabilities for the digital future.

FedEx and Novartis

Here are a couple of examples.

In May, as described in #1 Microsoft and FedEx Pair Up to Revolutionize How Business Is Done, Microsoft and FedEx joined forces to do something far beyond delivering packages a bit faster or a bit less expensively. Instead, they set out to create “multiple joint offerings powered by Azure and Dynamics 365 that will use data and analytics solutions to reinvent the most critical aspects of the commerce experience and enable businesses to better compete in today’s increasingly digital landscape.”

As the headline says, FedEx believes that in close partnership with Microsoft, it can “revolutionize how business is done.” FedEx could have picked any tech company in the world to be its partner for that adventure—and it chose Microsoft.

In the introduction section above, I mentioned the remarkable relationships Microsoft has managed to create with many of its major customers, and certainly this FedEx “partnership” is one of those. And in that context, it’s important to bear in mind that the unprecedented “Surround” service will be only the first product of the Microsoft-FedEx collaboration. As I write in the article cited above, “while the sweep and ambition of their plans is breathtaking, it’s important to remember that FedEx Surround is only the first installment of their deep and broad collaborative partnership.”

The AI Innovation Lab—and Reimagining Medicine

Another example of the deep-level fusion of Microsoft technology with a customer’s ambition is the joint effort by pharmaceutical giant Novartis and Microsoft to do nothing short of reimagining medicine. Going far beyond the traditional model of “you give me some money and I’ll give you some technology,” the Novartis-Microsoft collaboration was centered around the creation of an AI Innovation Lab that would fuse the richest capabilities of each company to achieve something the world desperately needs: better and safer molecules and medicines in shorter periods of time. From my September article called Medical Moonshot: How Novartis and Microsoft Are Using AI to Reimagine Medicine:

“At the heart of that visionary collaborative effort is the fusion of expertise in deep scientific know-how from Novartis, with AI and data management expertise from Microsoft. On top of all that world-class domain expertise, leaders within both companies say, the other essential ingredient is culture: can the Novartis and Microsoft teams transcend the traditional dynamic of tech vendor and business customer to achieve outcomes that neither company could ever accomplish individually?”

Exemplified by these bone-deep partnerships with FedEx and Novartis, this is Microsoft’s big opportunity for 2021: forging alliances with customers—or are they better described as partners?—at a level of technological and cultural depth that other tech vendors simply can’t match.

Microsoft’s Challenges

I’ll outline 3 big challenges that I see for Microsoft in descending order of priority.

a. Azure Reliability

Some say we’re in the early stages of the “experience economy,” so maybe you have to be one of the world’s handful of hyperscalers to be able to truly comprehend this recent addition to the experience-economy literature: Advancing the outage experience—automation, communication, and transparency.

That is the actual name of an August 2020 blog post from Azure CTO Mark Russinovich, and here’s the one-sentence descriptor of that post: As part of our Advancing Reliability blog series, we’re outlining the investments we’re making to continue improving the outage experience.”

Okay, so I get the idea: outages are truly awful so anything that can be done to reduce that awfulness is—or at least should be?—a positive. So I understand the intent of Russinovich and the Azure team in their efforts to “advance the outage experience.”

Azure

Don’t advance the experience—eliminate the outages!

But really—if a global business is considering putting its most essential workloads on Azure, wouldn’t that prospect want Microsoft to eliminate outages rather than “advancing the outage experience”?

On the flip side, under the leadership of Russinovich, Microsoft has been much more transparent about the issue of Azure reliability and dependability. That’s commendable and needs to be continued. But the very existence of a campaign such as this one is a sign that the Azure team, for all of its outstanding accomplishments, still has a very long way to go before enterprise customers are fully comfortable. Here at Cloud Wars, we first started tracking this issue back in January with Microsoft Tackles Top Challenge: Boosting Azure’s Reliability and we’ll continue to watch it closely in 2021.

 

b. Balancing IaaS Achievements and SaaS Aspirations

It’s great that Microsoft plays at all 3 layers of the cloud—IaaS, PaaS, and SaaS—because that gives it the chance to address more issues and opportunities for customers.

At the same time, to do so successfully in 2021 and beyond will require an exquisite balancing act between partnerships with other tech firms and the very healthy growth ambitions that all great companies have.

So here’s what Microsoft has to balance: on the one hand, lots of big global customers want to move their big on-premises workloads—primarily SAP but also lots from Oracle and others—to the cloud. And Azure has built a large and thriving practice for helping those customers move those workloads and applications to Azure. It all usually works well, and everybody’s happy.

But, on the other hand, Microsoft’s also built a high-growth $2-billion SaaS business around Dynamics 365 enterprise applications. So just how exactly will Microsoft avoid having Dynamics 365 become a competitor to the new generation of SaaS apps—including ERP—from SAP and others? Particularly as Nadella refers to how much different and better Dynamics 365 is from those “monolithic” enterprise apps of the past?

This is by no means an existential crisis for Microsoft, but it’s also a head-on fight that Nadella and team would likely rather avoid.

 

c. Can Microsoft Keep Satya Nadella Challenged and Happy?

Someone might say that’s a foolish question: after all, if you’re CEO of Microsoft, what other job could possibly be as interesting, motivating and stimulating?

But consider this: Satya Nadella is 53 years old and 28 years ago he joined Microsoft at the age of 25. Almost all of his adult life has been at one company. There’s not a darned thing wrong with that—it is in every respect an extraordinary story. But to become CEO of Microsoft, and to then achieve the remarkable levels of success that Nadella has achieved requires a supreme intellect; passionate energy, commitment and devotion; and a restless spirit that will not settle for anything less than the absolute best.

And my question is this: can any company, including Microsoft, continue to meet and exceed the imagination and spirit of someone like Nadella, who at the still-very-young age of 53 could be many measures be considered as the world’s top CEO?

Unique Differentiation

Here are 10 ways that Microsoft sets itself distinctly apart from the competition.

  1. The deep and strategic partnerships it’s been able to strike and maintain with world-class customers.
  2. Its unmatched ability to address every facet of its customers IT environments—or, as Nadella puts it, their “digital estates”
  3. Its financial muscle, discipline, and leverage.
  4. Its very early entry into the hybrid cloud business and unwavering commitment to it.
  5. Its quiet—but, I think, not quiet for long—advances in the database market and its big ambitions there as outlined in Hey Larry Ellison: Microsoft’s #1 Priority Is Replacing Oracle Database.
  6. Satya Nadella.
  7. Its massive and wide-ranging commitment to being a world leader in AI and ML.
  8. Its aggressive moves into not only 5G but also the telecom market.
  9. Its ability to keep Azure growing at hyperspeed even as the size of that business becomes truly substantial (one analyst recently said Azure now brings in more revenue than Windows)
  10. Its wide-ranging and unmatched breadth of partnerships with just about company on the Cloud Wars Top 10 makes it easier for Microsoft’s customers to do business with those other companies. And that’s an outcome not every tech vendor’s willing to pursue
Cloud Wars Top 10 by Cloud-Revenue Growth Rate

Vendor

Growth Rate

Quarter End

1. Google Cloud

44.8%

9/30

2. Oracle

33% (estimated)

8/31

3. Microsoft

31%

9/30

4. TIE: Amazon AWS

29%

9/30

4. TIE: ServiceNow

29%

7/31

5. Salesforce

20%

10/31

7. Workday

21%

10/31

8. IBM

19%

9/30

9. SAP

14%

9/30

10. Adobe Dig. Exper.

7%

8/31

Cloud Wars Top 10 by Cloud-Revenue Growth Rate

Vendor

Growth Rate

Quarter End

1. Google Cloud

44.8%

9/30

2. Oracle

33% (estimated)

8/31

3. Microsoft

31%

9/30

4. TIE: Amazon AWS

29%

9/30

4. TIE: ServiceNow

29%

7/31

5. Salesforce

20%

10/31

7. Workday

21%

10/31

8. IBM

19%

9/30

9. SAP

14%

9/30

10. Adobe Dig. Exper.

7%

8/31

Unique Differentiation

Here are 10 ways that Microsoft sets itself distinctly apart from the competition.

  1. The deep and strategic partnerships it’s been able to strike and maintain with world-class customers.
  2. Its unmatched ability to address every facet of its customers IT environments—or, as Nadella puts it, their “digital estates”
  3. Its financial muscle, discipline, and leverage.
  4. Its very early entry into the hybrid cloud business and unwavering commitment to it.
  5. Its quiet—but, I think, not quiet for long—advances in the database market and its big ambitions there as outlined in Hey Larry Ellison: Microsoft’s #1 Priority Is Replacing Oracle Database.
  6. Satya Nadella.
  7. Its massive and wide-ranging commitment to being a world leader in AI and ML.
  8. Its aggressive moves into not only 5G but also the telecom market.
  9. Its ability to keep Azure growing at hyperspeed even as the size of that business becomes truly substantial (one analyst recently said Azure now brings in more revenue than Windows)
  10. Its wide-ranging and unmatched breadth of partnerships with just about company on the Cloud Wars Top 10 makes it easier for Microsoft’s customers to do business with those other companies. And that’s an outcome not every tech vendor’s willing to pursue

Leadership

There’s not much more I can say about Nadella, so let me highlight 4 other Microsoft leaders whose impact in the marketplace I see on a routine basis.

  1. CFO Amy Hood. As good as any CFO I’ve seen and always in complete control of not only the numbers but also the strategic initiatives and high-level maneuverings that a company of Microsoft’s size and stature must manage.
  2. Commercial business EVP Judson Althoff. Someone’s connecting all the dots on those extraordinarily complex customer engagements, and while Nadella sets the stage for many, it is Althoff and his team that push them through to completion and ensure they relentlessly deliver mutual benefits that exceed customer expectations (and probably Microsoft’s as well).
  3. EVP Scott Guthrie, who oversees Azure, AI and much more. Guthrie brings a sense of continuity along with a deep vision about where the company has been and where its customers need it to go. That is rare among the Cloud Wars Top 10 and a huge benefit to Nadella and the company.
  4. Gavriella Schuster, head of One Commercial Partner. For years—decades?—the model in the tech industry was fixed: vendor make the stuff, partners sell it. But under Schuster’s leadership, Microsoft flipped that to where partners who create great solutions around Azure can now have those sold by the Microsoft sales org. Same with customers who create great solutions: Microsoft will help them sell those solutions in the marketplace. Is any other company doing that sort of thing? If so, not at Microsoft’s scale. Again, this is a boldness of vision that leading companies must have—along with the discipline and will to execute on that vision.
Amy Hood
Amy Hood

Leadership

Amy Hood
Amy Hood

There’s not much more I can say about Nadella, so let me highlight 4 other Microsoft leaders whose impact in the marketplace I see on a routine basis.

  1. CFO Amy Hood. As good as any CFO I’ve seen and always in complete control of not only the numbers but also the strategic initiatives and high-level maneuverings that a company of Microsoft’s size and stature must manage.
  2. Commercial business EVP Judson Althoff. Someone’s connecting all the dots on those extraordinarily complex customer engagements, and while Nadella sets the stage for many, it is Althoff and his team that push them through to completion and ensure they relentlessly deliver mutual benefits that exceed customer expectations (and probably Microsoft’s as well).
  3. EVP Scott Guthrie, who oversees Azure, AI and much more. Guthrie brings a sense of continuity along with a deep vision about where the company has been and where its customers need it to go. That is rare among the Cloud Wars Top 10 and a huge benefit to Nadella and the company.
  4. Gavriella Schuster, head of One Commercial Partner. For years—decades?—the model in the tech industry was fixed: vendor make the stuff, partners sell it. But under Schuster’s leadership, Microsoft flipped that to where partners who create great solutions around Azure can now have those sold by the Microsoft sales org. Same with customers who create great solutions: Microsoft will help them sell those solutions in the marketplace. Is any other company doing that sort of thing? If so, not at Microsoft’s scale. Again, this is a boldness of vision that leading companies must have—along with the discipline and will to execute on that vision.

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The Big Question for Microsoft

  • Can it resolve the Azure reliability challenges in the face of what will be huge pressure from, in particular, Google Cloud and Oracle?

  • Can it continue to steer clear of the political intrigue in which other tech giants have become enmeshed?

  • Can it continue to orchestrate its massive portfolio of products, solutions and technologies in a marketplace that demanding tech vendors accelerate product development, time to deployment, time to value, and time to innovation?

  • Can it weave its large and growing set of Azure products into a customer-centric set of solutions that make as much sense in the unfolding digital strategies of those customers as they do to Azure product managers? Take a look—the list is very impressive in its completeness—but is Microsoft able to weave this point-solutions into customer-value packages in ways that decision-makers can readily grasp?

    –AI + Machine Learning, Analytics, Blockchain, Compute, Containers, Databases, Developer Tools, DevOps, Hybrid, Identity, Integration, Internet of Things, Management and Governance, Media, Migration, Mixed Reality, Mobile, Networking, Security, Storage, Web, Windows Virtual Desktop.

About The Author

I’ve analyzed the enterprise-tech business for more than 25 years as an editorial executive and more recently as Chief Communications Officer at Oracle. I’ve written thousands of articles and columns about business innovation, strategy, leadership, disruptive technology, digital transformation, cloud computing, AI and more. In late 2016, I resigned from Oracle to launch the Cloud Wars franchise. It began with the Cloud Wars Top 10 ranking and weekly articles, and has since expanded into daily articles, a weekly newsletter, a podcast with more than 200 episodes, and now this one-of-a-kind Special Report.

About The Author

I’ve analyzed the enterprise-tech business for more than 25 years as an editorial executive and more recently as Chief Communications Officer at Oracle. I’ve written thousands of articles and columns about business innovation, strategy, leadership, disruptive technology, digital transformation, cloud computing, AI and more. In late 2016, I resigned from Oracle to launch the Cloud Wars franchise. It began with the Cloud Wars Top 10 ranking and weekly articles, and has since expanded into daily articles, a weekly newsletter, a podcast with more than 200 episodes, and now this one-of-a-kind Special Report.

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