There’s no doubt that size matters in the public IaaS cloud market. Total data centers, total regions covered, and total compute capacity are all important metrics when comparing cloud vendors, but what about that oft-touted, rarely explained magic number: cloud revenue. Is revenue a reliable metric for evaluating vendors? Probably not, according to a recent report from market research and analysis firm Gartner, Inc., “Vendor Cloud Revenue Claims—Should Enterprises Care?”
A little background: There are three ‘hyperscale’ (that’s analyst-talk for dominant) public cloud service providers (CSPs): Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). Of those three, Amazon is widely recognized as the largest, most dominant market force—AWS raked in $5.16 billion in 2014, and according to Gartner’s 2015 Cloud IaaS Magic Quadrant report, AWS boasts over 10 times more cloud IaaS compute capacity than the next 14 top providers combined.
With competition like that, it’s no surprise that CSPs are often doing anything they can to make themselves look bigger. Some vendors, like Azure, have taken the a physical approach, arguing that their global region coverage exceeds the competition’s, whilst others have pointed to strong revenues, as if to tell customers and investors “look, we’re making lots of money with this cloud thing, so we must be doing something right!”
Thing is, those revenue numbers are, ahem, cloudy at best.
Vendors announce big cloud revenues, but because they often don’t offer split numbers for their wide-ranging and disparate ‘cloud’ plays, so it can be hard to know where exactly that money is coming from, and whether their pure-play cloud business is as healthy as it may seem.
IBM, for example, claimed “US$9.4 billion in cloud revenue over the trailing 12 months,” says Gartner, but Big Blue also claims an annual run rate of US$4.5 billion in “as a service,” without any word on the difference between the two.
Microsoft also claims big cloud revenues—$8.2B a year, approximately—but Redmond isn’t exactly upfront with their cloud numbers. Revenue for Microsoft’s Office 365 goes under the cloud umbrella, even though it can include sales for Office products on desktop or mobile. Those desktop and mobile products offer cloud-connected features, but they are in no way strictly cloud, and there’s no guarantee that cloud features such as OneDrive are even being utilized.
And then there’s Oracle, whose founder Larry Ellison famously derided cloud computing as “nonsensical.” Less than a year after announcing the new “Oracle Cloud” strategy, the company has already found a way to characterize the leasing of computing hardware as IaaS, according to Gartner’s report.
The bottom line? Don’t let vendors impress you with big numbers.
Gartner recommends that “CIOs direct their organizations to never take vendor cloud revenue at face value.” Instead, says Gartner, cloud vendors should be evaluated on their “strategy and service mix.”
But you can’t completely ignore revenue—you need to make sure that any vendor you partner with is running a viable business—therefore, Gartner suggests that customers carefully question vendors when presented with revenue as an indicator of success.
Gartner recommends asking which revenue is generated by vendors’ pure-play IaaS or PaaS offerings, as opposed to revenue generated by cloud enabling technologies, consulting and professional services, and hosting or managed hosting services. Additionally, Gartner instructs buyers to determine if any noncloud services are included in cloud revenue, and how much of a vendor’s cloud business is actually being deployed, versus cloud shelfware bundled with traditional products.
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