Here’s Why Microsoft Corporation is the Biggest AWS Challenger in IaaS Cloud

A recent Gartner report shows that Microsoft is catching up in cloud IaaS, which is dominated by Amazon Web Services. At current growth rates, growth in Microsoft's cloud could outstrip the company's overall revenue growth in just a few years' time.

Jun 5, 2014 at 3:00PM

Several years ago,'s (NASDAQ:AMZN) AWS possessed what looked like an insurmountable lead in cloud IaaS, or infrastructure as a service. However, a report released by Gartner a few days ago shows that Microsoft (NASDAQ:MSFT) is finally managing to provide a credible challenge to AWS.

AWS still controls about 87% of this market but Microsoft is catching up fast. The below ''Magic Quadrant'' from Gartner shows AWS' leading position in cloud IaaS.

Microsoft Iaas

Source: Gartner, May 2014

Only Microsoft was ranked in the ''market leaders'' quadrant with AWS.The Gartner report noted that the other vendors are still far behind AWS and Microsoft Azure.

AWS enjoys a first-mover advantage since its cloud has been running for years. As a result, it enjoys a much larger partner ecosystem of software-as-a-service, or SaaS, applications and optimization services that are built to run seamlessly on the AWS cloud. Azure, however, is newer, and the report says that it still sports some feature gaps in security functionality and networking. Its partner network is also still growing.

The Gartner report reinforced an earlier report by the Synergy Research Group that showed that Microsoft is now a clear No. 2 in the combined cloud markets of IaaS, platform as a service, private and hybrid clouds.

Microsofts Cloud

Source: Synergy Research Group

Why the IaaS cloud is important
Gartner provided estimates that showed that the cloud computing market was worth about $131 billion by the end of 2013. Cloud advertising dominates this market with a 48% market share, followed by cloud business process services, or BPaaS, with 28% market share. SaaS has a 14.7% share, IaaS commands a 5.5% share. Cloud management and security services has 2.8%, and PaaS has just 1%.

IaaS and PaaS are the most commonly referenced cloud segments when talking about the public cloud. The IaaS market is about 5.5 times bigger than the PaaS market. There are growing concerns that the PaaS market could be consolidating, with IaaS and SaaS vendors already providing PaaS-like offerings.

For instance Salesforce, the leading SaaS vendor, offers customers the platform to help them build their customer applications.  CenturyLink,an IaaS provider, has adopted PaaS technologies that enable its customers to build their apps and host them in their IaaS clouds.

Although it's still too early to tell, this might mean that the future of the cloud is IaaS and SaaS. Microsoft Azure started off as a PaaS offering. Google's cloud also began as a PaaS offering in the form of Google Application Engine, or GAE.

But it appears as if Microsoft is now concentrating more on building out its IaaS cloud, which seems like the right direction to take.The fact that Microsoft is second in the important IaaS market is a true testimony that its IaaS strategy is finally working.

Microsoft's has a highly flexible vision of infrastructure and services that not only allows customers the ability to offer stand-alone offerings, but also extends and interacts seamlessly with Microsoft infrastructure, as well as on-site applications driven by Hyper-V, Active Directory and Systems Center, and Windows Server.

Microsoft's powerful brand, history of running global-class consumer Internet properties, existing customer relationships, deep investments in engineering, and its aggressive road map have all contributed to this progress.

Revenue implications for Microsoft
Forrester Research predicts that businesses will spend $72 billion on cloud services and related software in the current fiscal year. With an 8% share of the cloud market, this could translate to about $5.76 billion in cloud revenue for Microsoft in the current fiscal year.

About a year ago, James Staten, a Forrester Research analyst, said that Microsoft Azure had the potential to double its growth each year for the next couple of years. He also noted that Azure probably had more net growth ahead of it than all its competitors.

Foolish bottom line
Microsoft's cloud could provide a huge boost to its revenue growth in the near future. In just three years or so, growth in the company's cloud revenue could outstrip its overall growth by all its other segments combined.

Are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends, Google (A shares), Google (C shares), and The Motley Fool owns shares of, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers