While Amazon (AMZN - Get Report) remains the top dog in cloud computing in the first quarter, with Amazon Web Services holding a commanding 33% of the global market share during the first quarter according to Synergy Research Group, Microsoft (MSFT - Get Report) , Alphabet (GOOGL - Get Report) , IBM (IBM - Get Report) IBM Cloud, Alibaba (BABA - Get Report) Alibaba Cloud and Oracle (ORCL - Get Report) Oracle Cloud are are gaining ground fast.
As the core service of cloud storage becomes a commodity, Morningstar analyst Rodney Nelson said, the cloud companies will have to carve out their identities through their value added services that set their offerings apart.
"Amazon and Microsoft are well on their way to establishing that stronghold," he said, though Google is also developing an identity as a global cloud provider.
Azure, Microsoft's cloud platform, is in second place with a 10% share, according to Synergy. IBM Cloud has 8% of the market and Alphabet's Google Cloud Platform has 5%. Oracle Cloud and Alibaba Cloud each have 3%. Microsoft, Google and Alibaba have annual growth rates of 80% or higher, Synergy reports, but still remain substantially behind.
While the group of tech giants control a majority of the market, other players have 38% of the global business.
"The biggest thing Amazon has going for them is they've been in this market for double the time of most of the other large vendors," Nelson said. The company launched in 2006, he said, while Azure and Google were not full-fledged competitors for a half-decade or more.
"If you go look at the features and services of AWS, it's a laundry list of modern computing services," Nelson added. The offerings run from artificial intelligence capabilities that translate text to speech or provide the brains for clients' chatbots to 3D gaming engines and mobile messaging services.
Catching Amazon is a tall order, given the company's lead. "We'd be talking in years rather than quarters, and even then it would have to result from AWS really taking its eye off the ball - while all the evidence shows AWS doing just the opposite and maintaining a strong focus on growing the business," Synergy Chief Analyst and Research Director John Dinsdale wrote in an email.
AWS is on pace to make $14 billion a year in sales. During the first quarter, Amazon added cloud clients such as Liberty Mutual, social media company Snap (SNAP - Get Report) and concert promoter Live Nation (LYV - Get Report) . UBS analyst Eric Sheridan suggested in a Friday note that AWS can maintain a 22% compound annual growth rate from 2016 to 2021.
Microsoft Azure scored some big wins in the first quarter by catering to IT needs of multinational corporations.
Microsoft CEO Satya Nadella told investors in a Thursday earnings call that Danish shipping giant Maersk, which has a fleet of more than 1,000 vessels and has operations in 130 countries, signed up with Azure to manage its supply chain and global trade. Swiss bank UBS is putting its risk management processes on Azure. Parisian communications giant Publicis Groupe paired Azure and Microsoft's Cortana intelligent personal-assistant platform to apply A.I. to marketing applications.
Companies that have deployed Microsoft's Office365 workplace applications suite or the Dynamics365 customer relationship management and enterprise planning software are targets for Azure. "Their stronghold is going to be helping guide their existing customers who have invested in the Microsoft ecosystem to the cloud," Nelson said. Azure is popular with startups and small businesses, Nelson added, and not just with large corporate IT groups. "It's really a positive sign that companies are investing in Microsoft's ecosystem and are not looking at it as a dinosaur," the Morningstar analyst added.
Meanwhile, Google CEO Sundar Pichai said that Google Cloud Platform is one of Alphabet's fastest-growing businesses. Recent customer signings include U.K. bank HSBC (HSBC) , retailer Home Depot (HD - Get Report) , oil and gas services provider Schlumberger (SLB - Get Report) and German corporate software developer SAP (SAP - Get Report) .
Google can benefit by leveraging its skills in managing massive amounts of data that it honed through its search and advertising businesses, Nelson said. "Big data analytics is going to be a strong suit for the Google Cloud Platform," Nelson said.