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2015 wasn't about AWS. It was about everybody getting ready to try to beat AWS

Will the end of cheap money cast a cloud over 2016?

Eclipse image via Shutterstock

2015 Year Review One star eclipsed all others in the enterprise in 2015: Amazon. Or, rather, its cloud division, AWS.

It somehow became a given that AWS leads in Infrastructure as a Service (Iaas), with the one-time ebook shop now a major IT infrastructure provider.

That ebook flogger has become an IT infrastructure provider for the likes of Ocado, Norwich Union, News UK, British Gas and the Co-Op Bank in the UK.

AWS’s services have gone far beyond humble compute and storage, and it currently has fingers in the pies of data warehousing, disaster recovery, content delivery networks and more.

The baton of fastest-growing AWS service passed from Redshift, AWS’s data warehouse as a service, to Amazon's relational database engine, launched in July.

Amazon claimed a 95 per cent year-on-year increase in virtual machine (EC2) instances and 120 per cent growth in data transfers from its storage service (S3).

Things have gotten so big, AWS announced its first UK region: a substantial commitment that’ll require several physical data centres.

But what did that mean where it matters, on money?

Drilling into the financials

After much excitement, mainly on Wall St and among tech’s media cheerleaders, Amazon began reporting how much money the AWS unit actually made.

Until this year, AWS was hidden in the North American “other” column of Amazon’s spreadsheet.

The inaugural figures, in April, saw net sales of $1.5bn versus $1.05bn in 2014. Two quarters later that number was $2bn versus $1.1bn – a change of 42 and 181 per cent respectively.

Profit more or less doubled between quarters – from $265m to $521m, up 96 per cent.

How did that stack up to the competition – the giant software providers lumbering into cloud after dominating the enterprise for decades.

From a fiscal perspective, comparisons are almost impossible. Everybody claimed they were a leader – that they were the industry’s fastest-growing cloud company.

But all hid behind the great reporting evil of run rate – to claim a size of future business extrapolated from today’s figures.

Run rate is about as financially and mathematically sound as the numbers behind a subprime loan. Even Microsoft’s genial ex-chief executive Steve Ballmer took the firm to task for hiding behind run rate rather than saying what Microsoft’s cloud was actually selling.

He spoke after Microsoft cooked up something called Intelligent Cloud as a financial reporting category, comprising Azure Windows server and enterprise mobility. This saw eight per cent growth $5.9bn in Microsoft’s most recent quarter, the firm said.

Microsoft Azure revenue and compute use had “more than doubled” year-over-year along with in Office 365 its online productivity and collaboration suite, it said.

SAP and Oracle, giants of the enterprise, also reported massive growth in their respective cloud services.

SAP in October reckoned on 116 per cent growth to €600m. In its second quarter, reported December, Oracle claimed 26 per cent growth.

But, unlike SAP, Oracle’s core business was hit hardest by the slowdown in spending in on-prem business software.

Sales of new software and maintenance in SAP grew 11 per cent to €3.5bn ($3.9bn) in the quarter reported in October; Oracle saw its on-prem business – its core engine - consistently fall quarter after quarter. In December Oracle reported another quarterly decline, down seven per cent to $6.36bn.

Faring the worst of all, however, was the company whose products it was once impossible to get fired for buying. IBM, the one-time hardware, software and services giant, had missed 14 quarters by October, when it reported a 14 per cent drop in net income for its third quarter to $3bn.

Like others, IBM also mixed its cloud amongst “other” stuff, making unambiguous comparisons impossible: IBM’s cloud has been added with analytics and engagement to comprise a category it called “strategic imperatives revenue”.

This was up 17 per cent year on year by October, while sales in the company’s familiar bread-and-butter services, software and hardware, all fell.

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