Amazon and Microsoft are at the top of the food chain in the growing cloud world, battling for everything from customers to talent.
Both are based in the Seattle area, and for much of their histories, the two companies haven’t butted heads. But their respective cloud pushes have helped give the region the reputation as the cloud capital. And while they now compete fiercely, the two tech giants are also learning from one another.
Scott Guthrie, executive vice president of Microsoft’s Cloud and Enterprise Group, said this morning at the GeekWire Cloud Tech Summit that Microsoft has learned from Amazon’s data- and customer-driven approach to retail. He thinks Microsoft has taught Amazon a thing or two about working with enterprises and partners.
As the top two cloud companies, there are obvious incentives to luring talent away. Plenty of tech executives around the area have spent time at both companies. And that has led to an interesting side effect, the blending of the two companies’ cultures, Guthrie said. “The cultures have gotten closer together over last the several years as a result of that cross pollination,” Guthrie said.
The numbers show that Amazon is still the cloud leader, but Microsoft is gaining. In RightScale’s 2017 State of the Cloud report, 57 percent of respondents said they are using AWS to run applications in the public cloud, but that number is the same as 2015 and 2016. Meanwhile, 34 percent of those surveyed said they are running apps on Azure in the public cloud, up from 20 percent a year ago. Google’s share of this market has risen as well. These figures indicate that customers aren’t leaving AWS; rather the cloud market is consolidating around tech giants Amazon, Microsoft and Google.
Among large enterprises, Microsoft is even closer to Amazon with 43 percent of respondents saying they use Azure in some way, to 59 percent for AWS. Obviously, these numbers exceed 100 percent, but many enterprises use multiple cloud providers.
Google trails the top two but has also made gains in the cloud business. Guthrie said Google is not to be underestimated, but it is still figuring out the partner side of the cloud business.
“I don’t see Google that often in most of the discussions we have with customers, whereas it’s pretty much Amazon and us in every single engagement competing,” Guthrie said.
While Guthrie says he takes all competitors seriously, thinking too much about the competition rather than the customer can be a huge mistake. The best way to be successful, he said, is to focus — maybe even obsess — on making customers happy.
It obviously starts with the technology. If a provider doesn’t have top-of-the-line tech capabilities, then it will be hard to compete. After that, issues of security and compliance can help close a deal, and that is an arena where Microsoft sees an advantage over Amazon.
Another place where Microsoft gives itself the edge is working with other businesses. For example, Microsoft has a program that incentivizes its Azure sales people to work with startups and other businesses building products on Azure. If a startup sells something to a Microsoft customer, the Azure salesperson actually gets a bonus from Microsoft that represents about 10 percent of the annual contract value of that sale.
The cloud has become a huge part of Microsoft’s bottom line. The company expects commercial cloud revenue to make up about 15 percent of its overall revenue this year. Guthrie sees the cloud business as one that requires plenty of up-front investment with the potential for a big long-term pay off.
That extends to customers as well. A huge enterprise doesn’t instantly decide to move everything to the cloud or to one provider. Usually, a company starts small, or “dips a toe in the water,” as Guthrie put it, and then a year or two later the ramp up comes.
“Rather than trying to get a big deal up front, it’s really about, get a small deal, get them successful and then they’ll move very fast,” Guthrie said.
All of this is happening against a backdrop of rapidly decreasing prices for cloud storage. It’s another effect of the competitive landscape. Guthrie said Microsoft’s business model assumes that the trend isn’t going anywhere, and the company is ready for it.
We’ll have video and more from Guthrie’s talk in an upcoming post.