Beware, Amazon & Google: 4 Horsemen of Microsoft Cloud Apocalypse

Competing with Microsoft is not for the faint of heart, and rolled into the simply superb fiscal-Q1 results Nadella & Co. released yesterday are 4 killer numbers demonstrating that Microsoft is achieving the seemingly impossible: as its cloud business reaches enormous proportions, some key growth rates are rising and others holding steady.

On my weekly Cloud Wars Top 10 rankings, Microsoft has been #1 for about 3 years, Amazon has held the #2 spot for the same duration, and hypergrowth #3 Google Cloud is exerting significant upward pressure on the current holder of the #2 slot.

Revelations presents the Four Horsemen of the Apocalypse as Conquest, War, Famine, and Death. Those last two are pretty grim and perhaps out of scope for this discussion—mostly, but not totally—but the first two forces of conquest and war could not be more apt for what’s happening in the Cloud Wars.

And those going to war with and attempting to avoid conquest by Microsoft in the cloud—and that would primarily be Amazon and Google Cloud but also Oracle—should be paying very close attention to the growth rates over the past five quarters of these 4 cloud businesses that symbolize the might and threat of the Microsoft Apocalypse in the Cloud:

1. Commercial Cloud: revenue was up 36% to $20.7 billion for the 3 months ended Sept. 30, and that’s a full 5 points higher than it was 5 quarters ago. And Microsoft’s cloud business now makes up 46% of the company’s overall revenue.

2. Azure: The rapidly proliferating portfolio of services offered within the company’s cloud infrastructure and platform business continues to grow at a dizzying clip of 50% even as the quarterly revenue base is probably more than $10 billion.

3. Dynamics 365: To me, this is the Trojan Horse (if I may extend the bellicose equine metaphor) of the Microsoft Cloud because these modern and modular enterprise apps are positioned to pull many other Microsoft revenue streams along with them. And just look at those rising growth rates: 5 quarters ago, 38% was a very nice achievement—but today, with an annualized revenue run rate that I’m betting (guessing) is more than $4 billion, the Dynamics 365 growth rate has leapt to 48%.

4. Office 365 Commercial: No doubt the inclusion of this product line will send the cloud purists into a huff. But that inside-the-bubble silliness aside, one of Microsoft’s great strengths is its ability to help customers manage not just portions of but their entire “digital estates”—an ability no other big cloud provider can match. This is a massive revenue stream for Microsoft and it continues to grow in the low to mid 20’s—and that’s impressive.

Final thoughts

In today’s wickedly competitive cloud market, trying to be “better” than Microsoft in all those areas simply won’t work—instead, Amazon, Google, and Oracle need to be different and play to their own strengths (and thank you, Chris Lochhead!). And for those companies, the great thing about the cloud is that it is such a massive and wide-open marketplace with an endless number of high-value new opportunities to dream up and create.

There’s an old saw in physics about what happens when an irresistible force meets an immovable object. The scary (or wonderful, depending on your feelings) thing about Microsoft these days is that, in some of those markets above, it is becoming something approaching an irresistible force, and in others its proving to be an object that’s going to be awfully tough to dislodge.

And the good news for Microsoft’s competitors is that the cloud market and opportunity are so vast and deep that they don’t need to try to be better than Microsoft—and should instead focus on being different and bringing new and different value and innovation to customers.

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