Apr
30
2021
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Cloud infrastructure market keeps rolling in Q1 with almost $40B in revenue

Conventional wisdom over the last year has suggested that the pandemic has driven companies to the cloud much faster than they ever would have gone without that forcing event, with some suggesting it has compressed years of transformation into months. This quarter’s cloud infrastructure revenue numbers appear to be proving that thesis correct.

With The Big Three — Amazon, Microsoft and Google — all reporting this week, the market generated almost $40 billion in revenue, according to Synergy Research data. That’s up $2 billion from last quarter and up 37% over the same period last year. Canalys’s numbers were slightly higher at $42 billion.

As you might expect if you follow this market, AWS led the way with $13.5 billion for the quarter, up 32% year over year. That’s a run rate of $54 billion. While that is an eye-popping number, what’s really remarkable is the yearly revenue growth, especially for a company the size and maturity of Amazon. The law of large numbers would suggest this isn’t sustainable, but the pie keeps growing and Amazon continues to take a substantial chunk.

Overall AWS held steady with 32% market share. While the revenue numbers keep going up, Amazon’s market share has remained firm for years at around this number. It’s the other companies down market that are gaining share over time, most notably Microsoft, which is now at around 20% share — good for about $7.8 billion this quarter.

Google continues to show signs of promise under Thomas Kurian, hitting $3.5 billion, good for 9% as it makes a steady march toward double digits. Even IBM had a positive quarter, led by Red Hat and cloud revenue, good for 5% or about $2 billion overall.

Synergy Research cloud infrastructure bubble map for Q1 2021. AWS is leader, followed by Microsoft and Google.

Image Credits: Synergy Research

John Dinsdale, chief analyst at Synergy, says that even though AWS and Microsoft have firm control of the market, that doesn’t mean there isn’t money to be made by the companies playing behind them.

“These two don’t have to spend too much time looking in their rearview mirrors and worrying about the competition. However, that is not to say that there aren’t some excellent opportunities for other players. Taking Amazon and Microsoft out of the picture, the remaining market is generating over $18 billion in quarterly revenues and growing at over 30% per year. Cloud providers that focus on specific regions, services or user groups can target several years of strong growth,” Dinsdale said in a statement.

Canalys, another firm that watches the same market as Synergy, had similar findings with slight variations, certainly close enough to confirm one another’s findings. They have AWS with 32%, Microsoft 19% and Google with 7%.

Canalys market share chart with Amazon with 32%, Microsoft 19% and Google 7%

Image Credits: Canalys

Canalys analyst Blake Murray says that there is still plenty of room for growth, and we will likely continue to see big numbers in this market for several years. “Though 2020 saw large-scale cloud infrastructure spending, most enterprise workloads have not yet transitioned to the cloud. Migration and cloud spend will continue as customer confidence rises during 2021. Large projects that were postponed last year will resurface, while new use cases will expand the addressable market,” he said.

The numbers we see are hardly a surprise anymore, and as companies push more workloads into the cloud, the numbers will continue to impress. The only question now is if Microsoft can continue to close the market share gap with Amazon.

 

Mar
23
2021
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Tableau CEO Adam Selipsky is returning to AWS to replace Andy Jassy as CEO

When Amazon announced last month that Jeff Bezos was moving into the executive chairman role, and AWS CEO Andy Jassy would be taking over the entire Amazon operation, speculation began about who would replace Jassy.

People considered a number of internal candidates viable, such as Peter DeSantis, vice president of global infrastructure at AWS and Matt Garman, who is vice president of sales and marketing. Not many would have chosen Tableau CEO Adam Selipsky, but sure enough he is returning home to run the division he left in 2016.

In an email to employees, Jassy wasted no time getting to the point that Selipsky was his choice, saying that the former employee helped launch the division when they hired him in 2005, then spent 11 years helping Jassy build the unit before taking the job at Tableau. Through that lens, the choice makes perfect sense.

“Adam brings strong judgment, customer obsession, team building, demand generation, and CEO experience to an already very strong AWS leadership team. And, having been in such a senior role at AWS for 11 years, he knows our culture and business well,” Jassy wrote in the email.

Jassy has run AWS since its earliest days, taking it from humble beginnings as a kind of internal experiment on running a storage web service to building a mega division currently on a $51 billion run rate. It is that juggernaut that will be Selipsky’s to run, but he seems well-suited for the job.

He is a seasoned executive, and while he’s been away from AWS since before it really began to grow into a huge operation, he should still understand the culture well enough to step smoothly into the role.  At the same time, he’s leaving Tableau, a company he helped transform from a desktop software company into one firmly based in the cloud.

Salesforce bought Tableau in June 2019 for a cool $15.7 billion and Selipsky has remained at the helm since then, but perhaps the lure of running AWS was too great and he decided to take the leap to the new job.

When we wrote a story at the end of last year about Salesforce’s deep bench of executive talent, Selipsky was one of the CEOs we pointed at as a possible replacement should CEO and chairman Marc Benioff step down. But with it looking more like president and COO Bret Taylor would be the heir apparent, perhaps Selipsky was ready for a new challenge.

Selipsky will make his return to AWS on May 17th and spend a few weeks with Jassy in a transitional time before taking over the division to run on his own. As Jassy slides into the Amazon CEO role, it’s clear the two will continue to work closely together, just as they did for over a decade.

Mar
17
2021
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Amazon will expand its Amazon Care on-demand healthcare offering U.S.-wide this summer

Amazon is apparently pleased with how its Amazon Care pilot in Seattle has gone, since it announced this morning that it will be expanding the offering across the U.S. this summer, and opening it up to companies of all sizes, in addition to its own employees. The Amazon Care model combines on-demand and in-person care, and is meant as a solution from the search giant to address shortfalls in current offering for employer-sponsored healthcare offerings.

In a blog post announcing the expansion, Amazon touted the speed of access to care made possible for its employees and their families via the remote, chat and video-based features of Amazon Care. These are facilitated via a dedicated Amazon Care app, which provides direct, live chats via a nurse or doctor. Issues that then require in-person care is then handled via a house call, so a medical professional is actually sent to your home to take care of things like administering blood tests or doing a chest exam, and prescriptions are delivered to your door as well.

The expansion is being handled differently across both in-person and remote variants of care; remote services will be available starting this summer to both Amazon’s own employees, as well as other companies who sign on as customers, starting this summer. The in-person side will be rolling out more slowly, starting with availability in Washington, D.C., Baltimore, and “other cities in the coming months” according to the company.

As of today, Amazon Care is expanding in its home state of Washington to begin serving other companies. The idea is that others will sing on to make Amazon Care part of its overall benefits package for employees. Amazon is touting the speed advantages of testing services, including results delivery, for things including COVID-19 as a major strength of the service.

The Amazon Care model has a surprisingly Amazon twist, too – when using the in-person care option, the app will provide an updating ETA for when to expect your physician or medical technician, which is eerily similar to how its primary app treats package delivery.

While the Amazon Care pilot in Washington only launched a year-and-a-half ago, the company has had its collective mind set on upending the corporate healthcare industry for some time now. It announced a partnership with Berkshire Hathaway and JPMorgan back at the very beginning of 2018 to form a joint venture specifically to address the gaps they saw in the private corporate healthcare provider market.

That deep pocketed all-star team ended up officially disbanding at the outset of this year, after having done a whole lot of not very much in the three years in between. One of the stated reasons that Amazon and its partners gave for unpartnering was that each had made a lot of progress on its own in addressing the problems it had faced anyway. While Berkshire Hathaway and JPMorgan’s work in that regard might be less obvious, Amazon was clearly referring to Amazon Care.

It’s not unusual for large tech companies with lots of cash on the balance sheet and a need to attract and retain top-flight talent to spin up their own healthcare benefits for their workforces. Apple and Google both have their own on-campus wellness centers staffed by medical professionals, for instance. But Amazon’s ambitious have clearly exceeded those of its peers, and it looks intent on making a business line out of the work it did to improve its own employee care services — a strategy that isn’t too dissimilar from what happened with AWS, by the way.

Mar
10
2021
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Could Marc Benioff be the next CEO to move to executive chairman?

Last month Jeff Bezos announced he would step down as CEO of Amazon later this year, moving into the executive chairman role, while passing the baton to AWS CEO Andy Jassy. Could Marc Benioff, co-founder, chairman and CEO at Salesforce be the next big-name executive to make a similar move?

A Reuter’s story published on Monday suggested that could be the case. Citing unnamed sources, the story indicated that Benioff’s CEO exit could happen this year. Further those same sources suggested that current Salesforce president and COO Bret Taylor is the likely heir apparent.

We wrote a story at the end of last year speculating on possible successors to Benioff, were he to step away from the CEO role. There were a number of worthy candidates, several of whom, like Taylor, came to the company via an acquisition. All the same, we thought that Taylor seemed to be the most likely candidate to replace Benioff.

We asked Salesforce for a comment on the Reuter’s story. A company spokesperson told us that the company doesn’t comment on rumors or speculation.

While the entire scenario fits firmly in the rumor and speculation column, it is not entirely unlikely either. What would it mean if Benioff stepped away and what if Taylor was truly the next in line? And how would that swap compare with the Bezos decision were it to happen?

Similar yet different

Salesforce and Amazon are both companies founded in the 1990s, each looking to shake up its industry.

For Amazon, it was changing the way goods (starting with books) were bought and sold. And for Benioff the goal was changing the way software was sold. Bezos famously founded his company in his garage. Benioff built his in a rented apartment. From these humble beginnings both have built iconic companies and accumulated enormous wealth. You could understand why either could be ready to step away from the daily grind of running a company after all these years.

Bezos announced that veteran executive Andy Jassy, who runs the company’s cloud arm, would be his replacement when the handoff comes. Jassy knows the organization’s priority mix as he’s been working at the company for more than two decades. He’s locked into the culture and helped take AWS from idea to $50 billion juggernaut.

While Benioff hasn’t made any actual firm pronouncement, we have seen Bret Taylor — who joined the company in 2016 when Salesforce purchased his startup Quip for $750 million — move quickly up the ladder.

Laurie McCabe, co-founder and analyst at SMB Group, who has been following Salesforce since its earliest days, says that if Benioff were to leave, he would obviously leave big shoes to fill. But she agreed that everything seems to point to Taylor as his successor should that happen.

“Salesforce has been grooming Taylor for awhile. He has some stellar credentials both at Salesforce, his own start-up, Quip, that Salesforce acquired, and at Facebook. There’s no doubt in my mind he can lead Salesforce forward, but he’ll bring a different more low-key style to the role. And I’m sure Benioff will stay very involved […],” McCabe said.

Two different situations

Brent Leary, founder and principal analyst at CRM Essentials says that while he believes Taylor could be chosen as Benioff’s successor, and would be qualified to lead the company, he’s taken a very different path from Jassy.

“I think Benioff moving on could be different from Bezos in the sense that Jassy has been at Amazon for over 20 years and was there to basically see and be part of most of the story. […] But if Taylor were to succeed Benioff there’s not as much [history] at Salesforce with him not being on board until the Quip acquisition in 2016,” Leary said.

Leary wonders if this relatively short history with the company could create some political friction in the organization if he were chosen to succeed Benioff. “I’m not saying that this would happen, but choosing one of the many possible heirs that have come via a number of high profile acquisitions could possibly lead to high level turnover from those not picked to succeed Benioff,” he said.

But Holger Mueller, an analyst at Constellation Research says that if you look at the range of candidates available, he believes that Taylor would be the best choice. “I don’t expect any issue because there is no one with a similar or even better background, which is when there are problems — that or when people are in an open competition as it used to be at GE,” he said.

We don’t know for sure what the final outcome will be, but if Benioff does decide to join Bezos and takes the executive chairman mantle at the company, it makes sense that the person to replace him will be Taylor. But for now, it remains in the realm of speculation, and we’ll just to wait and see if that’s what comes to pass.


Early Stage is the premier ‘how-to’ event for startup entrepreneurs and investors. You’ll hear first-hand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company-building: Fundraising, recruiting, sales, product market fit, PR, marketing and brand building. Each session also has audience participation built-in – there’s ample time included for audience questions and discussion. Use code “TCARTICLE at checkout to get 20 percent off tickets right here.

Mar
02
2021
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Microsoft Azure expands its NoSQL portfolio with Managed Instances for Apache Cassandra

At its Ignite conference today, Microsoft announced the launch of Azure Managed Instance for Apache Cassandra, its latest NoSQL database offering and a competitor to Cassandra-centric companies like Datastax. Microsoft describes the new service as a ‘semi-managed offering that will help companies bring more of their Cassandra-based workloads into its cloud.

“Customers can easily take on-prem Cassandra workloads and add limitless cloud scale while maintaining full compatibility with the latest version of Apache Cassandra,” Microsoft explains in its press materials. “Their deployments gain improved performance and availability, while benefiting from Azure’s security and compliance capabilities.”

Like its counterpart, Azure SQL Manages Instance, the idea here is to give users access to a scalable, cloud-based database service. To use Cassandra in Azure before, businesses had to either move to Cosmos DB, its highly scalable database service which supports the Cassandra, MongoDB, SQL and Gremlin APIs, or manage their own fleet of virtual machines or on-premises infrastructure.

Cassandra was originally developed at Facebook and then open-sourced in 2008. A year later, it joined the Apache Foundation and today it’s used widely across the industry, with companies like Apple and Netflix betting on it for some of their core services, for example. AWS launched a managed Cassandra-compatible service at its re:Invent conference in 2019 (it’s called Amazon Keyspaces today), Microsoft launched the Cassandra API for Cosmos DB in September 2018. With today’s announcement, though, the company can now offer a full range of Cassandra-based servicer for enterprises that want to move these workloads to its cloud.


Early Stage is the premiere ‘how-to’ event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company-building: Fundraising, recruiting, sales, legal, PR, marketing and brand building. Each session also has audience participation built-in — there’s ample time included in each for audience questions and discussion.


Feb
09
2021
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Is overseeing cloud operations the new career path to CEO?

When Amazon announced last week that founder and CEO Jeff Bezos planned to step back from overseeing operations and shift into an executive chairman role, it also revealed that AWS CEO Andy Jassy, head of the company’s profitable cloud division, would replace him.

As Bessemer partner Byron Deeter pointed out on Twitter, Jassy’s promotion was similar to Satya Nadella’s ascent at Microsoft: in 2014, he moved from executive VP in charge of Azure to the chief exec’s office. Similarly, Arvind Krishna, who was promoted to replace Ginni Rometti as IBM CEO last year, also was formerly head of the company’s cloud business.

Could Nadella’s successful rise serve as a blueprint for Amazon as it makes a similar transition? While there are major differences in the missions of these companies, it’s inevitable that we will compare these two executives based on their former jobs. It’s true that they have an awful lot in common, but there are some stark differences, too.

Replacing a legend

For starters, Jassy is taking over for someone who founded one of the world’s biggest corporations. Nadella replaced Steve Ballmer, who had taken over for the company’s face, Bill Gates. Holger Mueller, an analyst at Constellation Research, says this notable difference could have a huge impact for Jassy with his founder boss still looking over his shoulder.

“There’s a lot of similarity in the two situations, but Satya was a little removed from the founder Gates. Bezos will always hover and be there, whereas Gates (and Ballmer) had retired for good. [ … ] It was clear [they] would not be coming back. [ … ] For Jassy, the owner could [conceivably] come back anytime,” Mueller said.

But Andrew Bartels, an analyst at Forrester Research, says it’s not a coincidence that both leaders were plucked from the cloud divisions of their respective companies, even if it was seven years apart.

“In both cases, these hyperscale business units of Microsoft and Amazon were the fastest-growing and best-performing units of the companies. [ … ] In both cases, cloud infrastructure was seen as a platform on top of which and around which other cloud offerings could be developed,” Bartels said. The companies both believe that the leaders of these two growth engines were best suited to lead the company into the future.

Feb
04
2021
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The cloud infrastructure market hit $129B in 2020

The cloud infrastructure market in 2020 reflected society itself, with the richest companies getting richer and the ones at the bottom of the market getting poorer. It grew to $129 billion for the year, according to data from Synergy Research Group. That’s up from around $97 billion in 2019.

Synergy also reported that the cloud infra market reached $37 billion in the fourth quarter, up from $33 billion in the third quarter, and 35% from a year ago.

I’ve heard from every founder under the sun for the last 9 months that the pandemic was accelerating digital transformation, and that a big part of that was an expedited shift to the cloud. These numbers would seem to bear that out.

As usual the big three were Amazon, Microsoft and Google, with Alibaba now firmly entrenched in fourth place and IBM falling back to fifth. But Microsoft grew more quickly than rival Amazon, reaching 20% market share at the end of 2020 for the first time. Keep in mind that the Redmond-based software giant has now doubled its share since 2017. That’s remarkably rapid rapid growth. Meanwhile Google and Alibaba took home 9% and 6% respectively.

Here’s what that all looks like in chart form:

Cloud infrastructure marketshare for fourth quarter 2020 from Synergy Research.

Image Credits: Synergy Research

Amazon is an interesting case in that it has plateaued at around 33% for four straight years of Synergy data, but because it’s one-third share of an increasingly growing market, that means that it has kept growing its public cloud revenues as the category itself has expanded.

Amazon closed out the year with $12.74 billion in Q4 AWS revenue, putting it on a run rate of over just over $50 billion for the first time. That was up from $11.6 billion the prior quarter. While Microsoft’s numbers are always difficult to parse from its earning’s reports, doing the math of 20% of $37 billion, it came in with $7.4 billion up from $5.9 billion last quarter.

Google brought in $3.3 billion, up from $2.98 billion in Q3 2020, and Alibaba pulled in $2.22 billion, up from $1.65 billion over the same timeframe.

John Dinsdale, principal analyst at Synergy says the leaders are pretty firmly entrenched at this point with huge absolute market numbers and also huge gaps between the cloud providers. “AWS has been a great success story for over ten years now and it remains in an extremely strong market position despite increasing competition from a broad swathe of strong IT industry companies. That is a great testament both to Amazon and to the AWS leadership team and you’d have to suspect that will not change with the new regime,’ he told me.

He sees Microsoft as a worthy rival, but one that is bound to hit a growth wall at some point. “It is certainly feasible that Microsoft will continue to narrow the gap between itself and Amazon, but the bigger Microsoft Azure becomes the tougher it is to maintain really high growth rates. That is just the law of large numbers.”

Meanwhile, market share at the bottom of the cloud infrastructure space continued to decline even while the number of dollars at stake have continued to expand dramatically. “The market share losers have been the large group of smaller cloud providers, who collectively have lost 13 percentage points of market share over the last 16 quarters,” Synergy wrote in a statement.

Dinsdale says all is not lost for these players, however. “Regarding the smaller players (or the big companies that have only a small market share), they can either focus on specific market niches (can be based around geography, service type or customer vertical) or they can try to offer a broad range of cloud services to a broad range of customers. Companies doing the former can do quite well, while companies doing the latter will find it extremely tough,” Dinsdale told me.

It’s worth noting that Canalys has slightly different numbers with a total market of around $142 billion and almost $40 billion for the quarter, but the percentages are in line with Synergy’s:

Canalys 4th quarter 2021 cloud infrastructure market share percentages

Image Credits: Canalys

At some point the numbers get so big they almost cease to have meaning, but as large as the public cloud revenue numbers become, they remain a relatively small percentage of overall worldwide IT spend. According to Gartner estimates, worldwide IT spend in 2020 was $3.6 trillion (with a T). That means that the cloud infrastructure market accounted for just 3.85% of total spend in 2020.

Think about that for a moment: less than 4% of IT spend currently is on cloud infrastructure, leaving so much room for growth and for those billions to grow ever bigger in the coming years.

It would certainly make it more interesting if someone could come in and disrupt the leaders, but for now at least they are going to be hard to push out of the way unless something unforeseen and dramatic happens to the way we think about computing.

Feb
02
2021
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What Andy Jassy’s promotion to Amazon CEO could mean for AWS

Blockbuster news struck late this afternoon when Amazon announced that Jeff Bezos would be stepping back as CEO of Amazon, the company he built from a business in his garage to worldwide behemoth. As he takes on the role of executive chairman, his replacement will be none other than AWS CEO Andy Jassy.

With Jassy moving into his new role at the company, the immediate question is who replaces him to run AWS. Let the games begin. Among the names being tossed about in the rumor mill are Peter DeSantis, vice president of global infrastructure at AWS and Matt Garman, who is vice president of sales and marketing. Both are members of Bezos’ elite executive team known as the S-team and either would make sense as Jassy’s successor. Nobody knows for sure though, and it could be any number of people inside the organization, or even someone from outside. Amazon was not ready to comment on a successor yet with the hand-off still months away.

Holger Mueller, a senior analyst at Constellation Research, says that Jassy is being rewarded for doing a stellar job raising AWS from a tiny side business to one on a $50 billion run rate. “On the finance side it makes sense to appoint an executive who intimately knows Amazon’s most profitable business, that operates in more competitive markets. [Appointing Jassy] ensures that the new Amazon CEO does not break the ‘golden goose’,” Mueller told me.

Alex Smith, VP of channels, who covers the cloud infrastructure market at analyst firm Canalys, says the writing has been on the wall that a transition was in the works. “This move has been coming for some time. Jassy is the second most public-facing figure at Amazon and has lead one of its most successful business units. Bezos can go out on a high and focus on his many other ventures,” Smith said.

Smith adds that this move should enhance AWS’s place in the organization. “I think this is more of an AWS gain, in terms of its increasing strategic importance to Amazon going forward, rather than loss in terms of losing Andy as direct lead. I expect he’ll remain close to that organization.”

Ed Anderson, a Gartner analyst also sees Jassy as the obvious choice to take over for Bezos. “Amazon is a company driven by technology innovation, something Andy has been doing at AWS for many years now. Also, it’s worth noting that Andy Jassy has an impressive track record of building and running a very large business. Under Andy’s leadership, AWS has grown to be one of the biggest technology companies in the world and one of the most impactful in defining what the future of computing will be,” Anderson said.

In the company earnings report released today, AWS came in at $12.74 billion for the quarter up 28% YoY from $9.6 billion a year ago. That puts the company on an elite $50 billion run rate. No other cloud infrastructure vendor, even the mighty Microsoft, is even close in this category. Microsoft stands at around 20% marketshare compared to AWS’s approximately 33% market share.

It’s unclear what impact the executive shuffle will have on the company at large or AWS in particular. In some ways it feels like when Larry Ellison stepped down as CEO of Oracle in 2014 to take on the exact same executive chairman role. While Safra Catz and Mark Hurd took over at co-CEOs in that situation, Ellison has remained intimately involved with the company he helped found. It’s reasonable to assume that Bezos will do the same.

With Jassy, the company is getting a man who has risen through the ranks since joining the company in 1997 after getting an undergraduate degree and an MBA from Harvard. In 2002 he became VP/technical assistant, working directly under Bezos. It was in this role that he began to see the need for a set of common web services for Amazon developers to use. This idea grew into AWS and Jassy became a VP at the fledgling division working his way up until he was appointed CEO in 2016.

Dec
22
2020
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With a $50B run rate in reach, can anyone stop AWS?

AWS, Amazon’s flourishing cloud arm, has been growing at a rapid clip for more than a decade. An early public cloud infrastructure vendor, it has taken advantage of first-to-market status to become the most successful player in the space. In fact, one could argue that many of today’s startups wouldn’t have gotten off the ground without the formation of cloud companies like AWS giving them easy access to infrastructure without having to build it themselves.

In Amazon’s most-recent earnings report, AWS generated revenues of $11.6 billion, good for a run rate of more than $46 billion. That makes the next AWS milestone a run rate of $50 billion, something that could be in reach in less than two quarters if it continues its pace of revenue growth.

The good news for competing companies is that in spite of the market size and relative maturity, there is still plenty of room to grow.

While the cloud division’s growth is slowing in percentage terms as it comes firmly up against the law of large numbers in which AWS has to grow every quarter compared to an ever-larger revenue base. The result of this dynamic is that while AWS’ year-over-year growth rate is slowing over time — from 35% in Q3 2019 to 29% in Q3 2020 — the pace at which it is adding $10 billion chunks of annual revenue run rate is accelerating.

At the AWS re:Invent customer conference this year, AWS CEO Andy Jassy talked about the pace of change over the years, saying that it took the following number of months to grow its run rate by $10 billion increments:

123 months ($0-$10 billion) 23 months ($10 billion-$20 billion) 13 months ($20 billion-$30 billion) 12 months ($30 billion to $40 billion)

Image Credits: TechCrunch (data from AWS)

Extrapolating from the above trend, it should take AWS fewer than 12 months to scale from a run rate of $40 billion to $50 billion. Stating the obvious, Jassy said “the rate of growth in AWS continues to accelerate.” He also took the time to point out that AWS is now the fifth-largest enterprise IT company in the world, ahead of enterprise stalwarts like SAP and Oracle.

What’s amazing is that AWS achieved its scale so fast, not even existing until 2006. That growth rate makes us ask a question: Can anyone hope to stop AWS’ momentum?

The short answer is that it doesn’t appear likely.

Cloud market landscape

A good place to start is surveying the cloud infrastructure competitive landscape to see if there are any cloud companies that could catch the market leader. According to Synergy Research, AWS remains firmly in front, and it doesn’t look like any competitor could catch AWS anytime soon unless some market dynamic caused a drastic change.

Synergy Research Cloud marketshare leaders. Amazon is first, Microsoft is second and Google is third.

Image Credits: Synergy Research

With around a third of the market, AWS is the clear front-runner. Its closest and fiercest rival Microsoft has around 20%. To put that into perspective a bit, last quarter AWS had $11.6 billion in revenue compared to Microsoft’s $5.2 billion Azure result. While Microsoft’s equivalent cloud number is growing faster at 47%, like AWS, that number has begun to drop steadily while it gains market share and higher revenue and it falls victim to that same law of large numbers.

Dec
17
2020
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Spryker raises $130M at a $500M+ valuation to provide B2Bs with agile e-commerce tools

Businesses today feel, more than ever, the imperative to have flexible e-commerce strategies in place, able to connect with would-be customers wherever they might be. That market driver has now led to a significant growth round for a startup that is helping the larger of these businesses, including those targeting the B2B market, build out their digital sales operations with more agile, responsive e-commerce solutions.

Spryker, which provides a full suite of e-commerce tools for businesses — starting with a platform to bring a company’s inventory online, through to tools to analyse and measure how that inventory is selling and where, and then adding voice commerce, subscriptions, click & collect, IoT commerce and other new features and channels to improve the mix — has closed a round of $130 million.

It plans to use the funding to expand its own technology tools, as well as grow internationally. The company makes revenues in the mid-eight figures (so, around $50 million annually) and some 10% of its revenues currently come from the U.S. The plan will be to grow that business as part of its wider expansion, tackling a market for e-commerce software that is estimated to be worth some $7 billion annually.

The Series C was led by TCV — the storied investor that has backed giants like Facebook, Airbnb, Netflix, Spotify and Splunk, as well as interesting, up-and-coming e-commerce “plumbing” startups like Spryker, Relex and more. Previous backers One Peak and Project A Ventures also participated.

We understand that this latest funding values Berlin -based Spryker at more than $500 million.

Spryker today has around 150 customers, global businesses that run the gamut from recognised fashion brands through to companies that, as Boris Lokschin, who co-founded the company with Alexander Graf (the two share the title of co-CEOs) put it, are “hidden champions, leaders and brands you have never heard about doing things like selling silicone isolations for windows.” The roster includes Metro, Aldi Süd, Toyota and many others.

The plan will be to continue to support and grow its wider business building e-commerce tools for all kinds of larger companies, but in particular Spryker plans to use this tranche of funding to double down specifically on the B2B opportunity, building more agile e-commerce storefronts and in some cases also developing marketplaces around that.

One might assume that in the world of e-commerce, consumer-facing companies need to be the most dynamic and responsive, not least because they are facing a mass market and all the whims and competitive forces that might drive users to abandon shopping carts, look for better deals elsewhere or simply get distracted by the latest notification of a TikTok video or direct message.

For consumer-facing businesses, making sure they have the latest adtech, marketing tech and tools to improve discovery and conversion is a must.

It turns out that business-facing businesses are no less immune to their own set of customer distractions and challenges — particularly in the current market, buffeted as it is by the global health pandemic and its economic reverberations. They, too, could benefit from testing out new channels and techniques to attract customers, help them with discovery and more.

“We’ve discovered that the model for success for B2B businesses online is not about different people, and not about money. They just don’t have the tooling,” said Graf. “Those that have proven to be more successful are those that are able to move faster, to test out everything that comes to mind.”

Spryker positions itself as the company to help larger businesses do this, much in the way that smaller merchants have adopted solutions from the likes of Shopify .

In some ways, it almost feels like the case of Walmart versus Amazon playing itself out across multiple verticals, and now in the world of B2B.

“One of our biggest DIY customers [which would have previously served a mainly trade-only clientele] had to build a marketplace because of restrictions in their brick and mortar assortment, and in how it could be accessed,” Lokschin said. “You might ask yourself, who really needs more selection? But there are new providers like Mano Mano and Amazon, both offering millions of products. Older companies then have to become marketplaces themselves to remain competitive.”

It seems that even Spryker itself is not immune from that marketplace trend: Part of the funding will be to develop a technology AppStore, where it can itself offer third-party tools to companies to complement what it provides in terms of e-commerce tools.

“We integrate with hundreds of tech providers, including 30-40 payment providers, all of the essential logistics networks,” Lokschin said.

Spryker is part of that category of e-commerce businesses known as “headless” providers — by which they mean those using the tools do so by way of API-based architecture and other easy-to-integrate modules delivered through a “PaaS” (clould-based Platform as a Service) model.

It is not alone in that category: There have been a number of others playing on the same concept to emerge both in Europe and the U.S. They include Commerce Layer in Italy; another startup out of Germany called Commercetools; and Shogun in the U.S.

Spryker’s argument is that by being a newer company (founded in 2018) it has a more up-to-date stack that puts it ahead of older startups and more incumbent players like SAP and Oracle.

That is part of what attracted TCV and others in this round, which was closed earlier than Spryker had even planned to raise (it was aiming for Q2 of next year) but came on good terms.

“The commerce infrastructure market has been a high priority for TCV over the years. It is a large market that is growing rapidly on the back of e-commerce growth,” said Muz Ashraf, a principal at TCV, to TechCrunch. “We have invested across other areas of the commerce stack, including payments (Mollie, Klarna), underlying infrastructure (Redis Labs) as well as systems of engagement (ExactTarget, Sitecore). Traditional offline vendors are increasingly rethinking their digital commerce strategy, more so given what we are living through, and that further acts as a market accelerant.

“Having tracked Spryker for a while now, we think their solution meets the needs of enterprises who are increasingly looking for modern solutions that allow them to live in a best-of-breed world, future-proofing their commerce offerings and allowing them to provide innovative experiences to their consumers.”

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