Who’s Winning the Cloud?

It continues to be the golden age of SaaS. The model has been refined and optimized as a revenue engine and investor darling. That flows from its behavioral economics for buyers (digestible payments), and predictable recurring revenue for providers. And cloud infrastructure makes it all easily deployable.

One of the most notable SaaS/cloud converts of the past decade has been Microsoft. While other SaaS all-stars like Salesforce grew up with the model, legacy players like Microsoft had to adapt. Office 365 seems like a no-brainer today, but it wasn’t an easy transition from years of selling one-off licenses.

We continue to see signals that validate this move, including Microsoft’s revenue and public market performance in the Satya Nadela era — the biggest proponent of Microsoft’s cloud transition. Now Microsoft can add another trophy to its shelf, given its leading position in Okta’s annual SaaS report.

As background. Okta aggregates its internal data to show which SaaS platforms are getting the most annual logins. Given’s Okta’s position as a fairly prevalent authentication system, it’s in a good position to extract this data, though these results should be viewed as a sample of the SaaS universe.

Zero Sum

Drilling down, Microsoft’s leading spot is due to the login volume for Office 365.  This lead is evident in overall logins, and those segmented by geography. But it’s worth noting that the SaaS marketplace isn’t a zero-sum game necessarily. The data indicate ample room for multi-tool utilization.

For example, Okta reports that 36 percent of Office 365 users are also using Google Workspace (formerly G Suite). This is of course Google’s competing productivity suite that houses Google Docs, Sheets, Slides, etc. This is a surprising level of overlap between directly competitive products.

Going further down that rabbit hole, 44 percent of Office 365 users also use Salesforce, 41 percent use AWS, 15 percent use Smartsheet, and 14 percent use Tableau. Though Microsoft, leads the list overall, these figures suggest it may not be doing the best job seeding its own adjacent products to boost ARPU.

In this respect, Office 365’s biggest detriment could be one thing: Slack. In other words, workplace communication and collaboration hubs are a natural place to seed and channel one’s own products.  Microsoft is missing that opportunity for every user that opts for Slack instead of Teams.

Down the Stack

While we’re talking about cloud services and how they stack up, a related report was released this week from Synergy Research Group.  But rather than SaaS tools that reside at the app layer, this report looked further down the stack to evaluate cloud infrastructure players. Spoiler alert: AWS wins.

Following AWS’ unsurprising lead is Microsoft Azure, Google Cloud, Alibaba and IBM. There also appears to be a fragmented long tail, given that “other” ranks second behind AWS. This cohort likely represents legacy and on-premises systems that haven’t made the big move to the cloud yet.

Declining market share for those legacy systems is logical, as the transition to cloud architecture offers several advantages. This trend can also be seen in Synergy Research Group’s aggregate market figures: Cloud infrastructure revenues were $129 billion in 2020, up from $97 billion in 2019.

The pandemic can be thrown in there as another accelerant. Cloud infrastructure is certainly a Covid-aligned transformation given that it’s “distanced.” And like many other areas of tech adoption, it starts with large businesses then moves down market. We’ll keep a close eye on SMB implications.

 

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