Just about every week now brings with it at least one announcement from a major enterprise or Internet services firm that it plans to move a ton of workloads previously running on its own servers to Amazon.com (AMZN) , Microsoft (MSFT) or Alphabet/Google's (GOOGL) public cloud platform.
Don't expect the announcements to become less frequent anytime soon. If anything, their pace could accelerate in the coming months as businesses conclude that the benefits of moving workloads to the cloud go well beyond potential cost savings and fewer operational headaches. And Amazon, thanks to its various competitive strengths, is well-positioned to capture a lion share of these announcements compared to its peers.
On Tuesday, Verizon (VZ) , which exited the public cloud services market in 2016, announced it's embracing Amazon Web Services (AWS) in a big way. The telecom giant said AWS will be its "preferred" cloud platform (not the same as its only cloud), and that it's migrating over 1,000 business-critical apps and database systems. The workloads include several databases that will be migrated to Amazon's Aurora database engine -- it provides enterprise-class features for the open-source MySQL and PostgreSQL databases, has been seeing triple-digit workload growth and (Larry Ellison's protests aside) has become a headache for Oracle (ORCL) .
The announcement comes two weeks after Verizon's Oath unit (Yahoo and AOL's parent) declared AWS to be its preferred cloud, and said it's both migrating existing apps to AWS and building new cloud-based apps meant to run on the platform. Other companies and business units to have made similar announcements in the past include Disney, Expedia, Turner, Comcast, GoDaddy, GE, Capital One, Netflix (yes, Netflix) Salesforce.com and Workday. Many other large enterprises have likely made similar moves, but chosen to keep them private.
The latest AWS announcements come after Amazon disclosed in late April that its AWS revenue rose 49% annually in Q1 (an acceleration from Q4's 45% growth) to $5.44 billion (believed to be more than twice that of #2 player Microsoft). And though depreciation expenses related to heavy capital spending have pressured the segment's margins some, AWS's operating income rose 57% to $1.4 billion.
There's still a lot of headroom for AWS to grow its footprint. Earlier this year, Morgan Stanley estimated 44% of workloads will be run on cloud infrastructures by the end of 2021, up from a current 21%. Moreover, the total number of server workloads continues to steadily grow -- both due to new enterprise workloads in fields such as AI/machine learning and analytics, as well as adoption of consumer and business cloud apps/services offered by third parties (Netflix, Spotify, Salesforce.com, Box, Adobe, etc.).
This trend is good news for major hardware and chip suppliers to the public cloud giants, such as Arista Networks (ANET) , Broadcom (AVGO) , Intel (INTC) and Micron (MU) . And it's a major problem for IT hardware giants that have struggled to land major orders from the cloud giants, such as IBM (IBM) and HP Enterprise (HPE) .
A recognition by businesses that the value proposition for public clouds doesn't simply revolve around cost savings is contributing to the growth. They can vary a lot based on how efficient a company is at running at its own data centers, as well as the types of workloads it's thinking about migrating -- or the time that CIOs and other executives can free up by not having to worry about managing their own hardware. Rather, a lot of the value comes from the speed at which brand-new workloads can be deployed, and as recently noted by Google cloud chief Diane Greene, the ability of cloud providers to offer access to cutting-edge services that can't be found elsewhere.
If the service announcements Microsoft made for its Azure cloud platform at last week's Build Live conference or the ones that Amazon made at AWS conferences in April and November are any indication, Global 2000-type companies would be foolish at this point not to start relying at least partially on public clouds at this point, even if it's more economical to keep running certain on-premise workloads.
From machine learning programming interfaces (APIs) to data warehousing to IoT device management to globally-distributed databases, there are plenty of public cloud offerings that businesses can't launch on their own, regardless of their budgets.
There are still certain workloads that many businesses are likely to keep on their own infrastructures for the time being. Many apps with strict security or compliance needs are still kept on-premise. Red Hat (RHT) , which has seen plenty of enterprises and telcos adopt its OpenStack cloud infrastructure software offerings to help deploy private clouds, notes many businesses prefer to keep transactional workloads (for example, ERP business apps or billing systems) on-premise, while moving more elastic workloads that see their resource needs fluctuate a lot to the cloud.
But it's not hard to see what the broader trend looks like. And while most large enterprises will rely on multiple public clouds, owing partly to the strengths of different platforms -- for example, Google appears to have unmatched AI services, and Microsoft is a leader in hybrid cloud and IoT deployments -- AWS is well-positioned to claim an outsized share of large enterprise migrations. AWS's tremendous scale and geographic reach, as well as its unmatched feature set and (through the AWS Marketplace) developer and partner ecosystem, all work in its favor.
The controversy surrounding a $10 billion cloud contract that the DoD is reviewing bids for drives home AWS's edge in this fight. When the Pentagon announced that the contract would be winner-takes-all, rivals such as Microsoft, Oracle and IBM immediately complained, arguing that such a contract structure clearly works in Amazon's favor.
When it comes to smaller cloud deals involving a limited number of apps and services, Amazon's rivals can often provide stiff competition. But when it comes to mega-deals involving the wholesale shuttering of data centers, AWS still stands out from the pack.