The big three in cloud computing — Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's (GOOGL) Google — will continue their dominance even though their aggressive price-cutting to attract customers will likely ease up, says a UBS report.
Eric Sheridan, a UBS analyst, forecasts Amazon Web Services will maintain its market share in the low-to-mid 30% range through 2021. He says Microsoft will grow from 6% in 2016 to 18% in 2021. Google's share will increase from 4% to 12% over the same period, Sheridan said.
Amazon is the biggest provider of infrastructure-as-a-service, or IaaS, where customers lease number-crunching computers and data storage via the internet. Microsoft's Azure-branded cloud service is a leader in platform-as-a-service, or PaaS, selling applications and software that run on cloud infrastructure. Google's cloud computing business lags AWS and Microsoft in the enterprise market — consisting of large companies and government agencies.
Sheridan said in a note to clients that a UBS survey shows "price reductions broadly have been less than what headline numbers suggest."
"While 45% of enterprises still believe they can save over 30% after year two by migrating to cloud, 80% of cloud users expect prices to either increase or fall by just 0% to 10% in the next year, suggesting that the cost savings are attractive even without aggressive price cuts," Sheridan said.
Less price cutting means improved margins for the cloud service providers, he says. Both Amazon and Google report fourth-quarter earnings on Thursday.
AWS' third-quarter sales jumped 42% to $4.58 billion. Google doesn't break out its cloud business financials. Customers pay cloud service providers as little as pennies an hour per server or as much as $1 to $2 an hour, depending on the type of business workload.
"We expect heightened levels of investment and possibly a consolidation wave by the large public cloud companies as some players may look to a collection of private/public enterprise companies to address their respective development areas," Sheridan said.
Amazon shares climbed 1.1% to close at 1,417.68 on the stock market today. Microsoft ticked down 0.2% to 93.92. Alphabet was off less than 0.1% to 1,186.48.
REINHARDT KRAUSE4:44 PM E
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