I get this newsletter in my inbox. Here it is, reproduced in verbatim.
From: bob@accelerationeconomy.com
January 6, 2022
Cloud Revenue Report Card.
The Cloud Wars Top 10 vendors are going to post cloud revenue of just under a quarter-trillion dollars for calendar 2021. And while I tend to be a harsh grader, the only suitable grade that comes to mind for that type of performance is an A.
Maybe even an A+.
It was not that long ago that financial analysts were gushing about the far-horizon possibility of Microsoft reaching $20 billion in annual cloud revenue, and without a doubt that was a singular achievement that in turn triggered lots of questions about the cloud’s potential that ran the gamut from insightful to insipid:
are customers moving production workloads to the cloud?
will all that cloud growth cannibalize the SQL Server business?
can Azure remain fully stable in the wake of this surging demand?
how much of that $20 billion is “just” Office revenue moving to the cloud?
Heady stuff indeed. But in just a few years, that far horizon of $20 billion in annual cloud revenue has become $80 billion, and I’m betting that market leader Microsoft—the #1 company on the Cloud Wars Top 10 for the past 3 years—will later this month release quarterly details showing it’s delivered $80 billion in cloud revenue in calendar 2021.
Here are some thoughts on all of the Cloud Wars Top 10 companies relative to their calendar-2021 revenue and their marketplace performance throughout the year.
#1 Microsoft: $80 billion, grade of A.
#2 Amazon AWS: $60 billion, grade of A+.
AWS’s revenue actually accelerated thru most of 2021, and in both Q2 and Q3 AWS revenue grew at a faster pace than Microsoft’s cloud business. That’s the first time I can recall that happening in the past few years, and it is an outstanding achievement by AWS.
#3 Google Gloud: $19 billion, grade of A.
Thomas Kurian’s company really came into its own in 2021 and appears to be fully set for another outstanding year in 2022. The fastest-growing major cloud vendor, Google Cloud will need to continue accelerating without letup as the expectations of customers and the competition from Microsoft and AWS intensify.
#4 Salesforce: $26 billion, grade of A.
Marc Benioff has spun some fancy tales of what his powerhouse company can achieve now that Slack is in the fold, and he’s set some of his own far horizons for Salesforce out at $50 billion. Big question for 2022: will Benioff continue to claim that everything Salesforce does is CRM, or will he begin to reframe the debate around essential customer outcomes rather than outdated product categories?
#5 SAP: $11 billion, grade of B.
Christian Klein and team delivered solid and steady progress throughout 2021. But the price of poker continues to spike in these heady digital times and, as a result, more of the same “solid and steady” results in 2022 could mean that SAP is failing to fire the imaginations of its customers. It might not be fair to say that SAP needs to begin growing in the 20% range, but neither life nor the Cloud Wars are fair. So it’s time for SAP to unleash some of its unfair competitive advantages more aggressively.
#6 Oracle: $11 billion, grade of B.
Lashed together by history, strong-willed founder/leaders, and the power of their respective technologies, Oracle and SAP delivered remarkably similar cloud-revenue results in 2021. But early indications are that Oracle is preparing to pull away from its longtime rival in 2022 as CEO Safra Catz has stated that Oracle’s cloud business will continue to grow more rapidly for each of its next 2 quarters and right thru the end of FY22 on May 31. Cloud growth in the mid-to-high 20’s plus the breakthrough Cerner acquisition give Oracle a very bullish outlook for 2022.
#7 ServiceNow: $5.6 billion, grade of A.
Another year of strong performance for Bill McDermott and ServiceNow, but 2022 will present some unique challenges for a company that eagerly discusses its $15-billion future. Until now, ServiceNow has filled some huge white spaces in the market and has done a brilliant job in doing so—but the needs of customers in 2022 and beyond will require more innovation and more depth and more industry expertise from ServiceNow than it’s ever had to deliver before. Can McDermott and team scale up as they scale out?
#8 Workday: $5.0 billion, grade of B+.
With its love of advanced technology and its boldness in naming and embracing the entirely new category of Enterprise Management Cloud, Workday’s entering 2022 with solid momentum in its business, its product pipeline, and its position in the marketplace. Consistent 20% growth has pushed Workday to the $5-billion mark in annual revenue, and it now needs to show how and why the Enterprise Management Cloud as a category is worthy of at least 20% annual growth going forward.
#9 Snowflake: $1 billion, grade of B+.
I know, I know—how can a company continue to grow 100% and not earn an A? Well, please see the line above about how neither life nor the Cloud Wars is fair. I admire the heck out of Frank Slootman’s achievement, but a little perspective is in order: while Slootman’s company did not generate $1 billion in cloud revenue for the entire calendar year, Microsoft generated $1 billion in cloud revenue every 4.5 days. So for all of Snowflake’s heady numbers and its unmistakable potential, there’s still a lot of daylight between it and the big boys and girls.
#10 IBM: $26 billion, grade of C.
Yet again, the tyranny of great expectations strikes: IBM has a $26-billion cloud business that’s growing somewhere in the range of 10%—what the heck is wrong with that? Well, in the rarified air of the Cloud Wars, that means that IBM’s cloud business is growing much more slowly than any of the other Cloud Wars Top 10 vendors. And that means that it is falling farther behind every week, every month, and every quarter. And no matter how many times IBM execs obsessively chant the “hybrid-cloud platform” mantra, it’s not going to help.
Final Thoughts
As we look out into 2022, it’s easy to see that the incredible potential displayed in 2021 is only the beginning—and that the coming year can be one of stunning successes, innovation, and opportunity.
For the Cloud Wars Top 10 companies, it would certainly be easy to be seduced by recent successes and think, “I just need to keep doing what I’m doing.” But I think that’s a terrible mistake because customers are only just beginning to get a sense of what’s possible in the Re-Imagination Machine known as the enterprise cloud.
Bob