Cloud is a Global Market – Apart from China

New Q2 data from Synergy Research Group shows that Amazon, Microsoft and Google are clear leaders in the worldwide cloud market, based on quarterly revenues. Their market shares were 32%, 23% and 12% respectively, while no other company could claim more than 4%. Following the three leaders, the top six ranking is completed by Alibaba, Oracle and Salesforce. Putting China to one side, the top three cloud provider ranking is the same in all major regions – the US, the rest of the APAC region, Europe, and the rest of the world. Beyond the top three the ranking in the regions does change a little, with Oracle, Salesforce, IBM and NTT typically jostling for position. However, the commonality of the top three rankings demonstrates the truly global nature of the cloud market. To be a market leader requires huge scale, deep pockets, constant technical innovation, a global brand, a worldwide network of hyperscale infrastructure, and a long-term corporate commitment and focus. That represents major barriers for anyone who wants to seriously challenge the cloud leaders. In specific countries or regions there is room for local players to compete using local expertise, local credibility and leveraging regulatory or data residency requirements, but that tends to restrict local players to targeting relatively niche opportunities. China is different. Due to geopolitical and historic factors, western cloud providers are severely restricted from competing in the Chinese market, and the market is big enough to support multiple local companies. The market is currently led by Alibaba, Tencent, China Telecom and Huawei. The top ten players are all Chinese firms.

Synergy data shows that cloud infrastructure service revenues (including IaaS, PaaS and hosted private cloud services) were $79 billion in Q2, with trailing twelve-month revenues reaching $297 billion. Public IaaS and PaaS services continue to account for the bulk of the market. Geographically, the US remains by far the largest cloud market, followed at a distance by China, which itself is way ahead of other countries, led by Japan, UK, Germany and India. By region the US is actually far larger than the whole APAC region. Together, the US, China, APAC and Europe account for over 90% of the total worldwide market.

“This is quite simply a game of scale. Between them Amazon, Microsoft and Google now have a global network of over 560 operational hyperscale data centers. In Q2 alone they invested over $48 billion in capex, most of which went towards building, equipping and updating their data centers and associated networks,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “However, there are still plenty of opportunities for local companies to compete in their home markets. This is a huge market that continues to grow rapidly, and in all regions or major countries there is a long tail of medium-to-small players. The key there is to carefully focus on specific services, industry verticals or customers, where they can demonstrate an ongoing competitive advantage relative to the industry giants.” Synergy Research Group