• Cloud infrastructure services market was worth $39.5 billion in Q1
• AWS and Azure together account for more than half of that
• But the market is so big and still growing that others can still thrive
• Synergy Research outlines trends and opportunities
• CSPs can benefit from a strong and varied cloud services sector 

The cloud infrastructure services market is enormous and still growing at an incredible pace, trends that not only fuel the market’s dominant players – most notably Amazon Web Services (AWS) and Microsoft Azure – but also provide ample opportunity for others to develop meaningful and sustainable businesses, notes the team at Synergy Research Group, which does an excellent job of tracking and analyzing the market.

With the digital ink still drying on Amazon’s latest financial report, Synergy Research provided an update on the state of the cloud infrastructure services market, which was worth an estimated $39.5 billion during the first quarter of this year and generated revenues from enterprise users of $140 billion in the 12 months to the end of March. 

Slightly more than one third of that first quarter market value came from AWS alone: It generated revenues of $13.5 billion during the first three months of this year, an increase of 32% year-on-year. Its operating profit for the first quarter alone was $4.16 billion – this is an incredible business, yet one that invests heavily in developing new capabilities and products continuously. (This is why it gets to retain its market-leading position, right?)

As a result, AWS is still the clear market leader ahead of Microsoft Azure, the clear number two in the market – together, AWS and Azure account for more than half of global cloud infrastructure services revenues. Microsoft announced earlier this week that Azure’s sales grew by 50% during the first three months of this year, but didn’t provide an exact number for its revenues. (Synergy Research clearly has a model that gives it a good idea of Azure’s sales and market size, as does Canalys, which pegs Azure’s first quarter revenues at almost $8 billion in this press release.)

But as the Synergy Research chart above shows, there are plenty of other players in the market, not least of course Google Cloud, which saw its revenues grow by almost 46% year-on-year during the first quarter to $4 billion (though this total includes Google Workspace revenues as well as Google Cloud Platform, or GCP, revenues). 

Then look at the other names in the market, including IBM, Fujitsu, Oracle, NTT, Salesforce. As the Synergy Research team points out, these companies are not on the verge of competing with AWS or Azure for market leadership, but there is plenty of opportunity for growth and specialization.

AWS and Azure “don’t have to spend too much time looking in their rearview mirrors and worrying about the competition. However, that is not to say that there aren’t some excellent opportunities for other players,” notes the research firm’s Chief Analyst John Dinsdale in this press release. “Taking Amazon and Microsoft out of the picture, the remaining market is generating over $18 billion in quarterly revenues and growing at over 30% per year. Cloud providers that focus on specific regions, services or user groups can target several years of strong growth.”

All of this is good news for CSPs as they strive to become digital service providers (DSPs), as while some CSPs have their own cloud platform assets to varying degrees, it’s never going to be enough to support their requirements, as increasing numbers of networking functions and support systems become optimized to run on private or public cloud platforms, whether centralized or distributed. Just look at how Dish Network is building out its virtual, Open RAN-based 5G network on AWS as a pointer for where the market is heading.  

CSPs will need to work with cloud infrastructure services specialists to execute their strategies, and while AWS, Azure and Google Cloud have swept up the initial CSP engagements thanks to their scale and services (AI-enabled analytics, databases, etc) there is clearly room for others to provide options that are tailored to the needs of CSPs – IBM clearly thinks this is an opportunity. (See IBM unveils its Cloud for Telecoms and an impressive posse of partners.)

Might others provide more tailored services to telcos, especially as they start to deploy virtual RAN instances, densify their networks and expand their portfolios of cloud-enabled services? It’ll certainly be hard to compete with the likes of AWS et al, but as the cloud infrastructure services market grows even larger, so those specialist opportunities will become more viable for those with the know-how to develop specific offerings. 

- Ray Le Maistre, Editorial Director, TelecomTV