1.
First Mover Advantage
$4.0
$1.0 $0.8
$0.5
$-
$1.0
$2.0
$3.0
$4.0
$5.0
AWS
Microsoft
IBM
Google
2014 Revenue 2014 Market Share
30%
8%
7%4%
51%
AWS
Microsoft
IBM
Google
Others
Ready for battle
6%
1%
1%
2%
0% 5% 10%
Google
IBM
Microsoft
AWS
% of Company Revenue Debt
Victory and defeat
#1 Everyone Advances at 2014 Growth Rates
Free Cash Flow Cash
#2 New Borders Drawn after 3 Years
#3 Amazon Supply Lines Run Out
Iaas Paas
War of Attrition
In 2006 Amazon unleashed an IaaS and PaaS blitzkrieg called AWS. By the end of 2013 AWS captured a
third of the IaaS and PaaS market territory by opening new product fronts, and launching pricing
offensives almost daily. AWS looked invincible. But in 2014, superpowers Google, IBM and Microsoft
declared war on Amazon AWS with massive resources available to throw at what is sure to be an epic war
of attrition.
This industry brief illustrates the extent of AWS’s first mover advantages, the resources which Microsoft,
Google and IBM have to do battle, and four scenarios which will define victory and defeat for the
combatants. It’s up to you to select which scenario will come true.
The bottom of this Industry Brief brings your attention to companies from China and India which haven’t
showed up on the global IaaS | PaaS market share radar…yet.
Off the Radar
We estimate in 2014 AWS generated $4 billion in revenue for
Amazon from Iaas and Paas, on 40% year over year growth.
The main challenger, Microsoft, doubled its revenue to $1
billion. Can Microsoft, IBM or Google catch AWS?
It’s taken AWS 8 years to grab almost a third of the IaaS
and PaaS market. The 51% of the market occupied by
“Others” is sure to be invaded by the big guys in the years
ahead. But which of the big guys?
Getting ready for battle means being willing and able.
Amazon is most willing because IaaS and PaaS revenue
from AWS is 6% of Amazon revenue and expected to grow.
Debt sucks cash that could be invested in the war effort.
IBM is saddled with the most debt, and this could emerge
as a key factor in their ability to sustain an offensive.
Cash is King and Microsoft free cash flow outstrips the
others by a mile. All the competitors can outspend AWS to
catch up if they choose to.
Need to buy a Rackspace to catch-up faster? Microsoft
and Google can put down a few $billion without breaking
a sweat.
Hyper growth never lasts more than a few years. But if it did, and Microsoft experienced 128% growth every year,
They would pass AWS in 2017 on their way to over a trillion dollars in annual revenues. IBM would pass AWS in
2020 if they sustained their 2014 growth rate.
Microsoft experienced 128% year-over-year growth in 2014, while AWS saw 40% growth. If we take down all their
growth rates by 15% per year, Microsoft passes AWS in 2018 on their way to becoming the first and only $100B IaaS
and PaaS provider. IBM passes AWS in 2022.
$3
$20
$35
$5
$- $20 $40
Google
IBM
Microsoft
AWS
$2
$27
$8
$11
$- $10 $20 $30
Google
IBM
Microsoft
AWS
$7
$89
$11
$62
$- $50 $100
Google
IBM
Microsoft
AWS
IaaS and PaaS are taking off in China and India, the two most populous countries on the planet. That means we can
expect to see them soon on the industry radar scanning for global leaders.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Microsoft 1 2 5 9 17 28 43 64 91 122
Google 1 1 1 1 2 2 3 3 4 4
IBM 1 1 3 4 6 9 13 16 20 23
AWS 4 5 7 9 11 13 15 17 19 21
0
50
100
150
Microsoft
Google
IBM
AWS
#4 AWS Defends Its Territory
Industry Brief
In this scenario, Amazon shareholders revolt and force the company to scale back spending on AWS to generate
profit. While growth of the competition slows at 15% per year, AWS decelerates faster on a trajectory that brings
them to 10% annual growth by 2021. Microsoft pulls even in 2017, followed by IBM who passes AWS in 2022.
If Amazon keeps innovating at the same pace they have the last eight years, this scenario could play out. Growth of
their competitors is set on a trajectory leading to 10% annual growth by 2021. AWS is on path to higher than
market 15% annual growth by 2021. If this happened, AWS wins the war of attrition and eight years from now
generates more than double the revenue of their nearest competitor.
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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Microsoft 1 2 5 12 27 62 140 320 730 1665
Google 1 1 1 2 2 3 5 7 11 16
IBM 1 1 3 5 10 18 33 62 115 213
AWS 4 6 8 10 14 19 27 37 50 69
0
1
10
100
1000
10000
Microsoft
Google
IBM
AWS
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Microsoft 1 2 5 9 17 28 43 64 91 122
Google 1 1 1 1 2 2 3 3 4 4
IBM 1 1 3 4 6 9 13 16 20 23
AWS 4 5 7 9 11 13 15 17 19 21
0
20
40
60
80
100
120
140
Microsoft
Google
IBM
AWS
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Microsoft 1 2 4 5 6 7 8 8 9 10
Google 1 1 1 1 2 2 2 3 3 3
IBM 1 1 2 3 4 5 6 6 7 7
AWS 4 5 7 9 11 13 15 18 20 23
0
5
10
15
20
25
Microsoft
Google
IBM
AWS
$Billions
$Billions
$Billions $Billions
$Billions