Microsoft Corp. and IBM Corp. have made significant gains in the fast growing markets for platform-as-a-service (PaaS), infrastructure-as-a-service (IaaS), software-as-a-service (SaaS), and related businesses, according to a new report from market watcher Synergy Research Group. (See graph below.)

The report shows Microsoft’s cloud-related business growing 164 percent year-to-year in the second quarter of 2014 (2Q14) while IBM/Softlayer grew 86 percent. Amazon.com Inc.’s Amazon Web Services (AWS), by comparison, grew 49 percent. The AWS growth was on a much larger base, but Synergy now shows that the total actual growth of the four major AWS competitors – Salesforce.com, Inc., Microsoft, IBM and Google is larger than AWS, with Microsoft and IBM having the largest share of the increase. A year ago AWS had significantly larger growth than those four competitors combined.

Synergy estimates that quarterly cloud infrastructure service revenues now have reached $3.7 billion with annual revenues exceeding $13 billion. Microsoft and IBM have been gaining market share steadily over the last four quarters while the market shares of AWS and Google have been essentially unchanged.

The report estimates total AWS revenues “well in excess of around $1 billion” per quarter, nearly all of it from cloud infrastructure services. It reports that IBM and Microsoft also claim quarterly revenues of around $1 billion, but those include revenue from SaaS, cloud-related hardware products and associated professional and technical services.

“Microsoft is making huge strides in IaaS and PaaS, while IBM now has clear leadership in the private & hybrid infrastructure services segment,” said Synergy Chief Analyst and Research Director John Dinsdale.

Shift to hybrid

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IBM’s hybrid strength could prove particularly significant. For more than a year, analysts and corporate CIOs have been saying that medium-to-large enterprises have a strong preference for moving to private and hybrid clouds rather than making the leap directly to full external IaaS services for their core infrastructure. In October, for example, Gartner Inc. issued a report predicting that nearly half of large enterprises will have hybrid cloud deployments by the end of 2017.

AWS is handicapped in this growth market since it has not announced an on-premise version of its IaaS platform and does not offer services to help companies to integrate their internal private clouds with its service. IBM, Hewlett-Packard Co., Inc., and other enterprise players have on-premise private cloud solutions designed to integrate with their IaaS platforms.

AWS remains the overall leader in the cloud services market and is likely to maintain its lead in IaaS for some time. However, it no longer has the market to itself. The question is, will it be happy with the market share it can capture and hold as a pure PaaS/IaaS provider as these other competitors gain share steadily, or will it seek to branch out into hybrid clouds? So far Amazon has remained in its comfort zone,  but complacency has never been characteristic of the company.

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Cloud Infrastructure Revenues Growth graph courtesy Synergy Research Group