These numbers are very misleading considering they wrap up things like Office into “cloud revenue.” When talking about compute cloud they are still way behind Amazon although you don’t get that from the misleading headline.
"Microsoft hasn’t disclosed how much revenue Azure brings in, but the Evercore analysts estimated that it generated more $7.74 billion in the 2018 fiscal year."
From: https://www.cnbc.com/2018/10/24/microsoft-earnings-q1-2019.h...
The interesting thing about O365 is that it combines a very valuable licensing cash stream with a variety of services.
The story that Microsoft SEs used to sort of tell a few years back was that Microsoft needed so many spinning disks to support Exchange workload IOPS that they had ridiculous amounts of "free" storage available for low-IO workloads like SharePoint/OneDrive. No idea if that was true years ago or is true today.
Imagine if MS was forced to "unbundle" Office 365. Consumers could purchase a license to run MS Office on any platform. On of which might be hosted Azure. What percent of the Office 365 revenue would accrue to the products division compared to the cloud division. Sincere guess: 90%+.
Another hypothetical scenario. Imagine if Apple offered a deal on iPhones. Get an iPhone for free as long as you sign up for a grossly overpriced $1000 iCloud contract. All of a sudden Apple would have hundreds of billion in "cloud revenue". But no reasonable person would all of a sudden say that they're now the biggest cloud provider in the world.
You can't punish Microsoft's categorization of these things just because Amazon doesn't have directly competing products. Well, actually they do; they have Workdocs and hosted AD. But no one uses them. Both of these are official AWS products; are you going to suggest we should start sharding out Amazon's product suite by revenue per product just to get a perfectly fair comparison of revenue?
G-Suite is categorized as a Google Cloud product. I guess we should just completely cut G-Suite out of GCloud's revenue total? Even though it does directory-like functionality and competes directly with Office, Outlook, etc?
Where do you draw the line? Ultimately, you draw the line at mechanism of delivery and payment, which is what Cloud has always been about. Office 365 and AzureAD are pay-per-seat, and thus by extension correlates with pay-as-you-go, just like any other cloud product.
And when people buy Amazon RDS, they're primarily purchasing a database product, and the cloud just happens to be the mechanism of delivery.
Imagine if Amazon was forced to "unbundle" Amazon RDS. Consumers could purchase a license to run the database on any platform. On of which might be hosted AWS. What percent of the Amazon RDS revenue would accrue to the products division compared to the cloud division...
--
Yes, this is the literal definition of a "no true scotsman" fallacy.
Amazon Aurora does appear to be a somewhat unique offering, but it appears to be tightly coupled to their infrastructure; I doubt that it could be unbundled without major rearchitecture.
If something is described as 'cloud' but uses a definition most people don't recognise or describe as 'cloud', that's at least worth noting. It's arguably prescriptive linguistics.
There is clearly a distinction here. For example, I don’t know if the word Azure is even mentioned when I go to buy an O365 license.
And people can still buy standalone Office installations.
> For example, I don’t know if the word Azure is even mentioned when I go to buy an O365 license.
How does this matter? Microsoft includes this as Cloud revenue and not Azure revenue.
You can literally buy office as a standalone product. That's the ONLY way you could buy it a decade ago. So the current situation is exactly what you're describing.
However it might be true that I'm the exception on this, and that most of the Office365 licenses are sold to corporations that are more interested in the basic office tools.
With Dropbox dropping support for ZFS on Linux, I had no reason not to switch. It's cheaper than Dropbox and you get Office.
How exactly should they split out the email or OneDrive component from Word or Excel of your $10-20/month? I don't think there's really a sensible way to do it without overcomplicating things.
I feel like there is a fundamental distinction to be made between infrastructure services (like AWS S3, EC2, RDB, etc) and end-user services (like Office 365). Combining the two doesn't make a lot of sense; procurement for the two typically happens separately, and businesses frequently mix-and-match vendors for infrastructure and end-user services.
Microsoft is actively competing against AWS IaaS and PaaS services, and leveraging embedded product features and license terms to force the issue with enterprise customers. Microsoft's spin is that those embedded relationships will compel customers to just join Azure. (Example: Windows 10 and Azure AD dramatically simplify PC management. How receptive is the market to that proposition? (I don't know, btw))
If they aren't getting heavy traction with their millions of existing enterprise customers adopting cloud services, they are doing something wrong that Amazon is doing right.
Additionally, the fact the Microsoft can sell Office and Exchange is a known, irrelevant fact -- they've been extracting a toll from every business since like 1995. What isn't clear is if they have the ability to compete toe to toe with AWS (the market leader in IaaS/PaaS).
To me cloud provider in this context means a vendor that provides cloud platform for others to develop on top of. RDS counts, Office doesn't.
That's how I look at it and I'm sure that's how MS looks at it. Certainly they wouldn't be blinded by Office revenue and think Azure is close to beating AWS. Office competes with Google Work Suite which isn't even part of GCP (even though it's linked).
I completely agree with you on this one.
However all the cloud providers include their SaaS subscription services revenue in cloud revenue. So when comparing market, revenue and stocks, that's what we should compare them on. But here we are in this thread looking at their "cloud revenue" to figure out which is a bigger "cloud vendor". That's like comparing Apples and Oranges.
For comparing infrastructure offerings, it would be really misleading to include things like Amazon Music or MS Office (both of which are cloud offerings).
That said, I think that's evidence that this fits in the cloud revenue stream.
Frankly, Microsoft are coming off desperate.
In the world of large enterprise which is just now waking up and jumping all-in with "digital transformation" projects and "cloud strategies" Microsoft appears to be winning the battle. I work for a company that services large enterprises and anecdotally I'm seeing the majority of them choosing Azure over AWS. I believe this is in large part because Microsoft knows how to sell to enterprises, they have great tie-ins with existing on-prem core infrastructure like Active Directory which is a big deal to large companies. When large enterprises start jumping on board they will move the needle pretty significantly as they ramp-up. I anticipate Azure closing the gap on AWS pretty significantly over the next 2 years.
Using their "cloud" revenue to figure out which is a bigger "cloud vendor" is a fallacy.
I wish these large corporations didn't demand so much creativity from their accountants to bluster an image.
I may be wrong but I just don't think it's costing them billions in AWS infrastructure to run.