The largest cloud providers only increased their overall dominance in 2017, expanding share in a market still growing at an astronomical rate, according to a report released last week by Synergy Research Group.
Spending on cloud infrastructure services (IaaS, PaaS and hosted private cloud) shot up 46 percent in the final three months of 2017, faster than it had in any of the previous three quarters, according to the researcher's analysis of earnings results posted by all major vendors. Full-year revenue in 2017 grew 44 percent above the previous year.
The expansion was driven mostly by the usual suspects: Amazon Web Services, Microsoft and Google. But Chinese powerhouse Alibaba also made an impact, cracking the Top 5 rankings for the first time.
Those companies "all increased their share of the worldwide market at the expense of smaller cloud providers," said Synergy chief analyst John Dinsdale.
Synergy now pegs the quarterly infrastructure services market north of US$13 billion.
"The leading cloud providers all have things to be pleased about and they are setting a fierce pace that most chasing companies cannot match," Dinsdale said.
Amazon closed out its fiscal year with a strong quarter powered by a league-leading cloud business that delivered almost 75 percent of the e-commerce giant's profits and, for the first time, surpassed a US$20 billion run rate.
Amazon Web Services notched 45 percent year-over-year growth in the fourth quarter – an acceleration from the previous quarter that came at the same time margins expanded, according to financials disclosed Thursday.
AWS owned roughly one-third of the market at the end of the fourth quarter, according to Synergy Research. Over the last fiscal year, AWS clawed up its overall market share by one-half of a percent.
AWS revenue, again, exceeded the next four closest competitors combined, even as Microsoft made huge strides.
Azure revenue nearly doubled during Microsoft's second quarter of fiscal 2018, ending 31 December, compared with the same period a year earlier. That marked the 10th straight quarter in which Microsoft reported its public cloud business grew faster than 90 percent on a year-over-year basis.
Microsoft ended 2017 with roughly 13 percent of the cloud market, according to Synergy Research. Its 3 percent expansion in overall market share over the previous year exceeded all other cloud operators.
After more than five years of uninterrupted business contraction, IBM reported fourth-quarter of growth spurred by its cloud portfolio and new mainframes and processors.
The cloud business alone grew by 24 percent from 2016, accounting for US$17 billion of IBM's 2017 revenue.
IBM maintained its position as the third-largest cloud provider at the close of 2017, "thanks primarily to its strong leadership in hosted private cloud services," according to Synergy Research's Dinsdale.
IBM closed the year with roughly 8 percent market share, a decline of one-half of a percent from 2016.
Google chief executive Sundar Pichai told investors last week that Google Cloud was officially a billion-dollar per quarter business, and the company believes its public cloud is the fastest-growing in the world.
While Google doesn't break out financials for its cloud business, the "other revenues" category, which includes cloud, Google Play, and hardware, achieved US$4.69 billion in revenue for the fourth quarter -- up from US$3.40 billion during fourth-quarter 2016.
Google ended 2017 owning roughly 6 percent of the cloud market. That's a step up in overall share of one percent from 2016, according to Synergy Research.
Alibaba's cloud unit is the dominant provider in China's booming public infrastructure market and is rapidly growing its business globally.
Alibaba Cloud, sometimes called Aliyun, saw revenue grow by 104 percent in the fourth quarter, rising to US$553 million. The Chinese provider said it introduced almost 400 features and services to its cloud in the quarter.
Again doubling cloud revenue in the fourth quarter, Alibaba achieved roughly 4 percent market share in Synergy Research's analysis, cracking the top five of the leadership board for the first time and knocking Salesforce out of the fifth spot. Alibaba's overall market share grew by 1 percent from the previous year.
Many providers are struggling to break into the leadership pack of the cloud market. The 10 trailers to the top 5, all prominent names in the industry, as a collective are only slipping.
That's a list that includes Fujitsu, NTT, Oracle, Rackspace, Tencent, Salesforce and a few others. Their market share, collectively, declined to roughly 15 percent, even as they all grew the actual businesses in the rapidly heating market, according to Synergy Research.
"Most small- to medium-sized operators saw their market shares decrease," said Dinsdale.
And The Rest…
Smaller clouds, many with unique niches, business models or industry alignments, were pushed a little more out of the market last year by the hyper-scale powerhouses.
The providers evaluated by Synergy Research outside of the Top 15 collectively dropped in overall share by 4 percent, the researcher said. Together, they closed the fourth quarter with 20 percent of the market.
That group encompasses a wide range of companies, from telcos like Deutsche Telekom, BT, CenturyLink, Orange and SingTel; to traditional providers such as CSC, SunGard, HPE, and OVH; to specialists like DigitalOcean, Joyent, Virtustream and Engine Yard.
"Smaller companies can still do well by focusing on specific applications, industry verticals or geographies," said Dinsdale.
"But overall this is a game that can only be played by companies with big ambitions, big wallets and a determined corporate focus," he said.