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The hyperscale cloud market continues to grow and there is increasing evidence that the pace is accelerating. In 2018, the hyperscale cloud infrastructure market grew 56.3% y/y and is projected to have generated $48.2b in total revenue.
Unsurprisingly, AWS was the primary driver of this growth and continues to show remarkable consistency even as it reaches unprecedented levels of scale. Amazon’s growth alone pushed our five-year CAGR projection up for the second consecutive year and came in at 51.5% for the 2018-2023 period.
Despite Amazon’s dominance, the rest of the market has not stood still and is showing meaningful if not excellent progress. Azure, Alibaba and Google are scaling up quickly, building out global infrastructure footprints and pushing forward in areas of strength. Alibaba dominates China and has strong presence in various APAC markets, Google is winning with young technology firms and in emerging verticals like ad tech, while Azure is capturing and transitioning its installed base efficiently and methodically. IBM and Oracle are growing as well and creating unique value propositions in their own right.
The story of the hyperscale cloud sector continues to revolve around the directional shifts in value creation. The hyperscale scale market to this point has been all about scaling up and grabbing real estate. That is still very much the case and the battle is ongoing. But the market has started to transition to the value-add layer. Existing customer growth, driven by value-add service uptake, is increasingly at the centre of the sector’s growth trajectory. And it is the value-add found in machine learning, artificial intelligence and analytics that is determining the winners and losers in deals and ultimately, the market. The clouds are pouring resources into this area because it is the one place in the market that could have a relatively more even playing field and is a viable path to meaningful differentiation.
This report provides growth rate projections and total revenue estimates for the hyperscale cloud providers on a five-year basis. Included are geographic splits and a total market share summation. The quick take: the market shows no signs of slowing down. AWS has obviously built up a big lead, but that dominance will moderate over time. The battle is moving to areas that have much more open competition and the market is becoming global very quickly. This will create specializations and regional disparities that favour some clouds over others. Overall, there will be pockets of value opening up all over the map and it is not a foregone conclusion that only one cloud will capture everything.