The overall Liftr Cloud Index for the week ending Friday 1/25/2019 was 102.3 (+0.3%), up marginally from last week. Alibaba Cloud increased (62.7, +1.8%) and was the only tracked Cloud Serivce Provider (CSP) with any significant change from the previous week. Microsoft Azure (104.5, +0.5%) and Amazon AWS (106.4, +0.2%) were fractionally positive while Google Cloud was fractionally negative. All of the cross-industry All CSP attributes were flat to fractionally higher.
Liftr Cloud Index Methodology Improvement
In early January 2019 we normalized the Security scores for the specific security certifications claimed by each CSP. This change took effect with last week’s data collection.
Alibaba Cloud’s overall Liftr Cloud Index score increased based on strong growth across three attributes: Security (43.4, +10.3%), Presence (110.8, +4.6%) and Adaptability (33.6, +2.4%). These gains were tempered somewhat by a dip in Alibaba Cloud Sentiment (103.8, -2.1%). With the addition of new zones in China and Asia, Alibaba Cloud’s Presence score is now more than 30 points ahead of Microsoft Azure and is within 3 points of AWS and Google Cloud. Alibaba Cloud’s Adaptability score is last among the tracked CSPs, more than 90 points below Microsoft Azure’s score, because the number of apps in Alibaba Cloud’s app store lags Microsoft Azure’s by an order of magnitude. Also this week, Alibaba’s Service Level Agreements (SLAs) for downtime credits improved, narrowing Alibaba Cloud’s Reliability score with Azure.
This week, the normalized Security score for Alibaba Cloud jumped as we recognized its true investment in security compliance. Alibaba Cloud had been claiming high-level security compliance with many security standards that other CSPs break apart as separate compliance certifications.
Microsoft Azure’s Instance (128.3, +1.8%) and Adaptability (124.5, +1.4%) scores increased, further cementing Microsoft Azure’s lead on these attributes. Microsoft Azure’s compute instance pricing dropped slightly, improving its Instance score. Microsoft Azure’s overall index score is within 2 points of AWS.
Amazon AWS Sentiment (100.3, +1.5%) increased, helping AWS maintain its narrow lead on the overall Liftr Cloud Index.
Google Cloud’s Adaptability score (47.4, +2.1%) grew due to marketplace app additions; it is now ahead of Alibaba Cloud but still well-below Microsoft Azure and AWS. Google Cloud’s Instance score (109.9, -1.3%) faltered due to increases in compute instance prices but is solidly in second place ahead of Alibaba Cloud and AWS. Google Cloud’s Security score (61.7, -2.3%) declined due to the opposite effect from Alibaba Cloud. Google Cloud had claimed some security compliance certifications that were too low-level; we now normalize those certifications into the same clusters the other three tracked CSPs are graded against.
News, Analysis, Commentary & Opinion
The most important change for Alibaba Cloud in its Liftr Cloud Index data was the change in its Adaptability data. The reason: Alibaba was cleaning up its marketplace portfolio. At first, it trimmed its services from 290 to 280 applications. Later, it added more cloud services as the week went on. Alibaba Cloud has been expanding its coverage, adding availability zones within regions and reaching out to new customer segments. The portfolio change signals Alibaba’s close attention to focusing on the customer segments that will lead to faster revenue growth.
Amazon Web Services (AWS)
AWS saw several significant announcements this week. Importantly, it open-sourced SageMaker Neo, a managed containerized machine learning (ML) service. SageMaker is already widely used to build and train ML models that can be quickly readied for production. AWS knows that AI and ML are indispensable components of analytics for hybrid clouds. Given the momentum for enterprise workload migration to cloud services–and the digital transformation of businesses–having better and faster AI / ML tools will likely accelerate adoption of AWS services for hybrid cloud.
AWS also announced Amazon WorkLink, a managed service that supports single-click access to internal websites and web applications from end users’ mobile devices. This service is designed to scale on demand. WorkLink leverages Virtual Private Clouds (VPCs) and can span multiple domains inside an organization. Hybrid clouds spanning private clouds (inside companies) with public clouds (like AWS) are proliferating. This managed service bridges two types of clouds–private and public–while providing a consistent view for corporate end users across multiple business units inside large organizations.
Google Cloud saw its Sentiment drop last week, driven by incidents that were linked to security attacks. But, overall, Google Cloud also had several positive developments this week, including the announcement that BigCommerce, an Austin-based e-commerce SaaS provider, is migrating its infrastructure to Google Cloud Platform (GCP). This move is likely aimed at competing with Amazon and AWS in the e-tailing market space. BigCommerce had been using traditional managed hosting and hybrid cloud, some of which had been running on AWS cloud services. The move continues the trend of retailers partnering with AWS competitors to counter the Amazon+AWS impact on the overall retail marketplace. This trend was on view at the National Retail Federation (NRF) conference in New York, with Google Cloud, Microsoft Azure, IBM Cloud and Oracle Cloud announcing other retail-related partnerships.
On Thursday, Google Cloud said it is entering into a partnership with SAP National Security Services Inc. (NS2). The partnership will allow NS2 customers to leverage SAP HANA in-memory databases with Goggle Cloud services. The SAP group is an independent SAP business unit with customers in the public sector. Google Cloud is strengthening its partnership with SAP as it increases its focus on accentuating its support for enterprise business workloads.
Microsoft Azure announced it acquired Citus Data, a small database firm with 40 employees that wrote an open source extension to SaaS-ify the open source PostgreSQL database (often refered to as simply “Postgres”). Microsoft Azure will “accelerate the delivery of key, enterprise-ready features from Azure to PostgreSQL”. This acquisition will provide developers with a Microsoft-controlled open source alternative to Microsoft’s proprietary SQL Server, already widely used in Microsoft Azure and hybrid clouds linked to Azure. Postgres is widely used by the open-source community. This move from Azure supports the momentum for open-source development for CSP services and the containers and orchestration that support those services. However, we believe that Postgres will continue to be an important aspect of open-source development and DevOps. We also believe that Microsoft SQL Server instances will continue to migrate to Microsoft Azure, given their important role in enterprise computing, in cloud migration and in cloud-based storage for backup / recovery and business continuity purposes.
As originally announced in June (2018), Microsoft Azure announced this week that it is now providing additional Availability Zones support for the Azure Service Bus Premium and the Azure Event Hubs Standard in multiple geographic regions. The regions that will gain the new availability features are in the Eastern and Western US, Western and Northern Europe, central France and Southeast Asia. All of these service capabilities are designed to enhance the resiliency and availability of Microsoft Azure services.
DNS hijacking attacks have been surfacing this week, as US CERT and CISA issued warnings that apply to all internet and cloud services users. It appears that the attack leveraged some DNS-related features that present end users with what look like legitimate Google App Engine URLs, but those URLs are then redirected to malicious links. Publicized security attacks can affect customer Sentiment, in this case for Google Cloud, especially when the attack is first discovered. Perceptions about the attack will likely fade quickly, after the causes of the attack carefully analyzed and fully addressed.
The week’s Liftr Cloud Index showed some shifts, driven by Adaptability, Security and Sentiment in the worldwide cloud services marketplace. Some were driven by changes in methodology, others reflected the continual changes in the cloud services marketplace that the Liftr Cloud Index is tracking on a weekly and monthly basis. The overall Liftr Cloud Index Sentiment score increased again, though not so much as the week before, as the CSPs’ social media campaigns ramped-up their tweet volumes after winter vacations ended.
Last week IBM, Intel, and Xilinx reported quarterly earnings.
IBM announced its earnings on Tuesday January 22, 2019 reporting IBM Cloud revenue drove nearly one-quarter of IBM’s annual revenues of $79.6 billion for 2018. Cloud revenue was $19.2 billion for 2018, an increase of 12% year-over-year. Last week Red Hat shareholders approved the IBM acquisition of Red Hat, valued at $34 billion. The acquisition, announced last fall, is set to close in the second half of 2019. The approval got 99% of all shareholder votes.
Important factors in the IBM / Red Hat combination are:
Intel’s Xeon processors power most of the compute capability delivered by CSPs. Conservatively, over 98% of processors consumed by CSPs in 2018 were sold by Intel. Intel reported that its Data Center Group (DCG) growth rate for public cloud revenue was up 45% for the first 9 months (3 quarters) of the year. As a percent of DCG’s Q4 revenue mix, cloud was up 24% and communications service providers (network and telecom) were up 12%, with enterprise servers falling 5%. Cloud and communications now account for two-thirds of Intel’s Data Center Group (DCG) business, up from one-third “several years ago” (no further detail was given). This data indicated that the enterprise shift from buying on-prem servers to renting cloud instances is well under way.
Intel’s Xeon processor ASPs were up 5% in the DCG mix, even with cloud and communications service provider growth. Intel points to higher performance mix, but processor customization for large CSPs must also play a role in Intel DCG’s increasing ASPs. We expect Intel ASPs to suffer in 2019 as it becomes more aggressive about fending off competitor AMD’s EPYC server processors.
Intel did not announce a new CEO to replace Brian Krzanich, who resigned last June, contrary to our expectations. However, Intel DCG reported $23 billion revenue for Intel’s fiscal 2018 and seems to be doing well enough with CFO Bob Swan as CEO for the interim. Intel signaled they would “close on a new CEO in the near future”.
Xilinx reported that its data center revenue grew “double digits” within its last fiscal quarter and “nearly doubled” year-over-year. It reported that AWS, Alibaba Cloud and Huawei Cloud have deployed Xilinx FPGA-based SmartNICs (server network interface cards). Dell EMC has certified one of Xilinx’s new Alveo server FPGA accelerator cards for multiple versions of Dell EMC’s PowerEdge servers. Xilinx CEO Victor Peng mentioned that it has signed up additional FPGA-as-a-Service (FaaS) customers, but those future deployments are have not yet been announced.
While Xilinx’s data center business has been small compared to NVIDIA’s runaway GPU success, Xilinx is just at the beginning of its sales cycle for Alveo. Paul Teich describes Xilinx’s competitiveness in his Forbes article Xilinx To Compete With Intel, NVIDIA On Datacenter AI Acceleration.
Upcoming Earnings Reports
This week, Microsoft (Azure) will report its quarterly earnings on Wednesday January 30, 2019. Here are the cloud-related earnings releases for the next few weeks:
Liftr Cloud Insights will cover the important cloud-related aspects of each earnings release.
IBM Think: San Francisco February 12-15, 2019
KeyBanc Emerging Technology Summit: San Francisco, February 26-27, 2019
Have a great week!
Paul R. Teich, Principal Analyst, and your Liftr Cloud Insights team
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