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The Infrastructure as a Service Market Continues to Explode

By Paul Rubens (Send Email)
Posted December 19, 2017

When it comes to cloud computing, and specifically when it comes to providing virtualized compute resources in the cloud (aka Infrastructure as a Service), Amazon is crushing the competition — for now.

It's no secret that Amazon Web Services (AWS) is the dominant player in the IaaS market, but the extent to just how much Amazon is dominating it has been made clear by some recent research published by Gartner.Virtually Speaking

The worldwide IaaS public cloud market is exploding, up 31% from $16.8 billion in 2015 to $22.1 billion last year, and Amazon has gobbled up a significant proportion of that growth for itself. As a result, the company now has a 44.2% share of the IaaS market, worth almost $10 billion, up from 39.8% in the previous year.

The extent of Amazon's domination becomes clearer still when you realize that its nearest competitor, Microsoft's Azure, commands just 7.1% of the market — less than one sixth of Amazon's market share. Alibaba (the Chinese e-commerce company), Google, and Rackspace are left trailing far behind in third, fourth, and fifth places, respectively, together commanding a market share that is about the same as Microsoft's.

These five companies account for about 60% of the market, but the remaining 40% is made up of tiny IaaS providers looking to cash in on the extraordinary growth in demand for IaaS.

IaaS Aggressively Growing, But Trouble Looms for Some IaaS Companies

"The market for cloud services is growing faster than virtually every other IT market today, with much of this growth coming at the expense of the traditional, non-cloud offerings," said Sid Nag, research director at Gartner. "The demand for cloud-based IaaS continues on its path of aggressive growth, and the high growth of IaaS is also driving growth in related cloud markets. While platform as a service (PaaS) and software as a service (SaaS) are also exhibiting strong growth, IaaS is expected to show the fastest growth over the next five years."

The bad news for these tiny players is that they are doomed to failure. That, at least, is Gartner's view: it predicts these non-hyperscale providers will struggle to provide value to customers through their services. And unless they are able to provide some compelling reason(s) to exist, their customers are likely to drift away to the bigger boys in time.

Does that mean the AWS hegemony is likely to increase? Surprisingly, the answer to this question is: probably not. Amazon may be experiencing strong growth in IaaS revenues, but those of Microsoft, Alibaba and Google are growing much faster.

Slowly but surely they are starting to catch up with Amazon, and Gartner predicts this trend will continue into the foreseeable future. Only Rackspace is falling further behind, so in the next few years the leading five is likely to become a leading four of Amazon, Microsoft, Alibaba and Google.

The question Microsoft must be asking itself is how long it can keep its Azure public cloud service in second spot in the face of relentless pressure from the Chinese company. "Alibaba's 2016 growth of 127% reflects the company's position as the current volume leader and dominant player in the cloud services market in China," the Gartner research says.

It also points out, and worryingly so for Microsoft, that Alibaba is actively expanding its international footprint, and last year the company announced four new data centers in Europe, Australia, the Middle East and Japan.

It's by no means clear at this stage, but ten years from now the IaaS market could well be one with just two key players: AWS and Alibaba. As for Microsoft and Google, they may well end up being lumped in the group market "others."


Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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