Three hundred billion dollars and growing: that is the size of the cloud market in front of Amazon, Microsoft and Google.
At the GeekWire Cloud Tech Summit on Wednesday, Morgan Stanley Executive Director Brian Nowak said the market is growing rapidly, and it will be close to a $350 billion market by 2020. Cloud companies reported more than $50 billion in revenue in 2016, and Nowak expects that number to more than triple to $153 billion by 2020.
Nowak showed in his presentation the importance of the cloud to the futures of some of the world’s largest tech companies. He displayed two situations, one where cloud usage continues to grow and accelerate, and another where it slows down. For Amazon, under the bullish scenario, the cloud makes up just over half of the company’s market cap, and under the slower scenario, it still accounts for 35 percent of the business.
For Microsoft, the cloud is a whopping 70 percent of the company’s value under the rosy scenario and still close to half if the trend cools off. It is unclear what exactly Nowak included in the cloud category for Microsoft, but Microsoft includes revenue from software-as-a-service products like Office 365 when it publicly reports revenue.
The cloud is a much smaller part of Google’s business, but Nowak thinks the company has a lot of room to grow in that area.
The takeaway from all these numbers: watch the progress of the cloud to know where these companies’ values are heading.
“The extent to which these companies have success in cloud does have the potential to move the overall enterprise value and share prices,” Nowak said.
Rather than companies moving their existing work to the cloud, much of the growth is being driven by new technology. Concepts like driverless cars, voice-activated speakers and other trends didn’t exist several years ago, and that work is all being done in the cloud. History says that cloud growth is bound to slow at some point, but with the speed and volume of these new innovations, the cloud could buck the trend.
Amazon and Microsoft are the clear leaders in the cloud world, encompassing approximately half the market by revenue. Nowak said he doesn’t expect a lot of change in the pecking order over the next couple years.
“We do think that Microsoft and Amazon, who are the leaders now, about half the market, are going to remain about half the market over the next four or five years,” Nowak said.