Microsoft big winner in cloud growth

Microsoft Cloud ServicesThe question of whether the channel makes a difference in the cloud era is practically settled as Microsoft Corp. posts accelerating sales of platform and infrastructure services, gaining ground on market leader Inc.’s Amazon Web Services.

According to a new report by Synergy, Microsoft’s cloud services sales skyrocketed 154 percent in the first quarter of 2014, outpacing Amazon and Google Inc. combined. IBM Corp., which is also emphasizing cloud computing as a replacement to its traditional hardware business posted impressive 80 percent growth. But even the combined growth of Amazon, which posted 67 percent gains, and IBM isn’t enough to match Microsoft.

Microsoft has taken a lot of grief for its fractured, often-chaotic product strategy. Observers say Microsoft has struggled in recent years because it’s chosen to do not one thing well, while doing mediocre in many technologies. Cloud, it seems, is the exception.

While Microsoft has talked cloud for years, it’s been only in the last 18 months it’s made a full-court press on building its cloud business, particularly through channel partners. New CEO Satya Nadella has made “cloud-first” a rally cry for Microsoft and partner sales. And Microsoft’s channel organization has diligently worked to press partners to adopt and sell cloud products, as well as integrate applications with cloud services.

“Microsoft’s cloud growth really is impressive” said John Dinsdale, chief analyst and research director at Synergy Research Group. “A combination of marketing muscle and credibility with the target audience is helping it to make great strides.”

Synergy estimates Microsoft’s cloud services revenues are now $3.5 billion. When combined with sales of Office 365, Microsoft’s cloud business could be approaching $5 billion, putting it on par with its Windows and Office divisions.

IBM, too, is showing strong momentum as it leans on cloud computing to offset losses in traditional hardware divisions and provide a source of growth. Earlier this year, IBM announced a $1.2 billion investment in building out its SoftLayer cloud services around the world. It’s also racing to certify scores of business applications to run on its infrastructure. And, like Microsoft, IBM is pressing channel partners to adopt and support its cloud services.

How important is the channel to the growth of cloud services? Just look at the results of other cloud rivals, Google and, which posted 60 percent and 37 percent growth, respectively. While Google and play in the channel, they remain rooted in direct sales models.

The Synergy report places Microsoft firmly in the number two spot in cloud computing, followed by IBM. But, the research firm says, Amazon is in no danger of losing its market leadership position anytime soon. Amazon’s cloud market share is 27 percent, compared to Microsoft’s 8 percent, IBM’s 6.5 percent,’s 6 percent and Google’s 4.5 percent.

Competition will likely increase as more vendors enter the segment or increase their cloud efforts, chasing what is estimated to become a $230 billion marketplace. In the last month, Cisco and Hewlett-Packard have announced $1 billion cloud development programs, while CenturyLink entered the cloud price wars. Additionally, regional, national and international cloud service providers, including AT&T, Verizon and Rackspace continue to ply the market with new products and service.

The cloud surge by Microsoft and IBM may prove that the difference maker in this future marketplace is the strength of a channel to sell and support services.

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