When
it comes to cloud platforms, there's Amazon (NASDAQ:AMZN) -- and then
there's everyone else. Amazon Web Services, or AWS, is very nearly a
$10-billion-a-year business. Last quarter, the company generated $2.4
billion in revenue from its cloud-computing division, up 69% year over
year.
Microsoft (NASDAQ:MSFT) is
widely considered the second-place cloud solution thanks to the
widespread use of Windows. The company's Azure platform is growing
rapidly. Microsoft reported that revenue from Azure increased 127% year
over year last quarter, but it lumps its exact figures in with the rest
of its intelligent cloud segment.
While it's growing rapidly, can Microsoft Azure catch up to AWS?
Relying on Windows 10
Azure
has historically done well with enterprises that already use a lot of
Microsoft products, including Windows and Windows Server. Azure is the
only cloud platform that supports running Windows machines, so it's an
excellent solution for businesses that have built systems for Windows
instead of Unix.
Microsoft's
goal with Windows 10 is to reach 1 billion devices within two to three
years. That includes both PCs and mobile devices. Net Market Share's
latest report shows Windows 10 climbed past Windows 8.1 and Windows XP
to become the second most-popular desktop operating system, with 11.8%
of the market.
With
an estimated 1.5 billion PCs in use, there are approximately 180
million Windows 10 users. Microsoft recently announced there are 200
million Windows 10 users, but that includes mobile devices and Xbox.
Why
is Windows 10 important? Not only do enterprises that use Windows
typically favor Azure more than those that don't, but the OS is built
with Azure in mind. The built-in system backup uses Azure. Businesses
can monitor all of its employees' Windows devices on its network with
Azure Active Directory without any configuration. Users will be able to
use a single sign-on to access apps and resources in the cloud, thanks
to Azure.
Windows 10 is off to a strong start, and the growth in Azure is telling of the symbiotic relationship the two divisions have.
Jumping on the bandwagons
Microsoft
isn't just resting on its laurels and hoping Windows 10 will drive
growth of Azure. Satya Nadella is focused on making its cloud solutions a
part of the next big waves in computing.
Almost
a year ago, Microsoft introduced its Azure Machine Learning service.
Machine learning has become a big focus of tech leaders like Google and
Facebook in recent years as they aim to improve their abilities to
understand users, and predict what they want. While it wasn't first to
market (Google had an API for years, and IBM released its Watson
technology to beta in December 2014), it beat Amazon by a couple months.
Last
March, Microsoft unveiled its Internet of Things suite, which enables
billing, monitoring, analytics, and predictive maintenance for IoT
devices. Not to be outdone, Amazon unveiled its own IoT platform in
October, which is tightly integrated with other AWS features. The
Internet of Things market is expected to grow about 17% per year over
the next six years, to $1.7 trillion, according to IDC. Cloud computing
will play an important role in making those devices useful.
Can Microsoft catch Amazon?
While
Microsoft's Azure is growing faster than Amazon Web Services, there's
no exact way to tell if the gap is actually narrowing between the two
companies. AWS added $1 billion in business year over year last quarter,
which might be more than Azure's total business in the same period. AWS
is profitable, bringing in $687 million in net income last quarter; it
remains unknown if Azure is profitable.
While
Microsoft is doing everything it can with its cloud platform, Amazon
remains the one to beat, and still has a ton of momentum behind it. The
growth of Windows 10, machine learning, and the Internet of Things, may
help close the gap, but it's still a huge growth market that's
essentially up for grabs.
The next billion-dollar iSecret
The
world's biggest tech company forgot to show you something at its recent
event, but a few Wall Street analysts and the Fool didn't miss a beat:
There's a small company that's powering their brand-new gadgets and the
coming revolution in technology. And we think its stock price has nearly
unlimited room to run for early in-the-know investors!
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