The Wall Street Journal formally reported something most of us know implicitly, the big players in the cloud are investing heavily in it. Still it’s impressive to see the hard numbers. In 2016, Microsoft, Google, and (of course) Amazon invested over $31.54 billion in capital expenditures and leases. If you like more granular numbers, that works out to $1,000 per second.
Given current business and technology trends, it’s a no-brainer that it should increase. I’m honestly surprised it’s not more given how aggressive Google has been, and how much AWS seems to constantly be expanding.
So what’s the downside? Well, imagine you want to start a IaaS/PaaS business, or in some way adapt to compete for still growing market in cloud computing. It’s a pretty rough landscape to compete in right now, the barrier to entry (or to just maintain competitiveness) is staggering, when you want to go head to head with AWS or Azure. The article notes that Oracle says it’s still committed to challenging Amazon’s dominance in the space. They’re making key acquisitions to stay relevant. But there’s a huge delta both in investment and actual revenue. Amazon outspent Oracle’s total capital investments by 250% based on capital expense alone (not including leases), and made about twenty times more revenue. Plus Oracle’s revenue even lags Amazon’s growth, not great for a still emerging competitor.
Oracle likes to talk a big game when it comes to competing in the cloud. But they have a tough road to hoe for the foreseeable future. No one is coming into the market at this time to compete directly with the big three. Oracle’s best bet is focus, offering extremely targeted cloud hosted solutions, like they’re doing with NetSuite’s ERP assets. Of course, Amazon also know their ubiquitous generality also leaves them occasionally inefficient at particulars. They have the money to invest in these edge cases, while still maintaining overall market dominance.
The other player that might give the big three a run for their money is a Chinese cloud provider like Alibaba. It’s seeing triple digit growth, and while its cloud business is still on the small side, focus on the Chinese market could allow them to be a formidable when they really try to tackle other countries. But that still seems years away.
Overall, while it’s nice to have some hard numbers for 2016, I don’t think it surprises anyone to see that companies are making big investments in the cloud, and will continue to do so going forward.
