Amazon still holds a major lead in cloud computing usage among startups
For the past several years, Google has tried to turn what was previously an Amazon-led industry into a battle for cloud computing.
Amazon’s launch of Amazon Web Services in the early 2000s ushered in a new era for startups and the technology industry as a whole. You’ll have a hard time finding a startup that isn’t built on top of AWS or at least launched using AWS before migrating to either a different service or its own hardware. It’s been so successful that Amazon has turned cloud computing, with a variety of different offerings for different use cases, into one of its most profitable businesses with a $10 billion annual run rate.
A large, successful business like that will naturally attract a lot of competitors. And there is now some competition in the cloud computing space in the form of Google Cloud and Microsoft Azure. Both Google and Microsoft have invested substantially in the cloud to build a new, attractive business. But it’s still a battle to both attract new startups and convince existing companies to move to their services.
To get a better sense of the dynamics between the three companies, we dug into Brex data to see what kind of services Brex customers are using. Our customer base consists primarily of early- to mid-stage startups, though it increasingly includes ecommerce and life sciences customers with our recent product launches. Even with the $5,000 AWS credit Brex customers are eligible for as part of Brex rewards, Brex customer spend on AWS outstrips Google Cloud, Microsoft, and Heroku at a staggering level — even among companies that use multiple products.
A look at Google Cloud and Amazon Web Services
Among our customers, Amazon is the leader by a wide margin when it comes to cloud spend. Amazon has had the lead for quite some time. If you go back to the fourth quarter, AWS held a commanding lead, though Google Cloud has gained some share. Heroku — which makes AWS easier to use for developers, but is actually owned by Salesforce — also holds a small percentage of total spend deployed by companies. Microsoft Azure, meanwhile, represents a trivial fraction of our customer spend.
There’s an opportunity for Google to at least get startups to try its services out as either an experiment for a portion of their operations. Google is increasingly pushing products like the Tensor Processing Unit, or TPU, as a way to get an edge in machine learning. Google, in this way, is leaning on its prowess in machine learning to at least own that segment of cloud computing. But even still, the majority of Brex customers are what we would consider “AWS loyal” — in that they spend exclusively on AWS.
Google still seems to be finding a foothold when it comes to startups using cloud computing operations. Brex customers are increasingly paying for both AWS and Google Cloud.. Needs like effective machine learning are getting more and more complex, and AWS and Google Cloud may be great at different things. So there may, in the end, be room for more than one player. Amazon, however, remains the clear leader when it comes to cloud spend — even if startups are increasingly using both Google Cloud and Amazon Web Services.
To be sure, Brex’s customer base skews toward earlier-stage companies. So this doesn’t give us a full view of the entire market for cloud computing usage. A Canalys report indicated that Amazon held an estimated 32.3% share in Q4 2018, followed by Microsoft Azure at 16.5% and Google Cloud at 9.5%. But startups do represent a market that companies like Amazon and Google hope to grow with as they become massive companies.
The future of Cloud
Competition is always a good thing. It forces all the players involved to improve their products to woo companies. Technical problems are only getting more sophisticated going forward as the best tools across all industries begin applying machine learning to their data to improve their products. That requires intense on-demand compute power, which makes more sense in the cloud. The average startup probably doesn’t want to invest in servers in their building to run their complex training models — especially when they can do so orders of magnitude faster (and cheaper) with cloud services.
When we looked at the spending dynamics for ridesharing usage among Brex customers, we also took a brief look at how it was growing compared to a variety of other industries. We sometimes look at ridesharing as one of the newer hot sectors. But the growth of cloud usage, at least among Brex customers, absolutely dwarfs that of ridesharing.
Cloud computing will continue to drive innovation, especially when it comes to startups. Both Amazon and Google today do just as much to enable the startup ecosystem as they did almost a decade earlier, and the importance of cloud computing is likely going to continue to grow. Even though Amazon is the clear leader among Brex customers, a rising tide does indeed lift all boats — and better cloud products mean more innovation and great products for customers.
Brex examined customer spend for cloud computing products to get a better sense of the cloud usage trends among Brex customers over the past several quarters. Share of spend is defined as the amount of money startups are spending on a product over the total spend of products in that category. Overlapping spend for GCP and AWS is defined as the total amount of money spent on that product for companies that pay for both products.
As part of its underwriting process, Brex maintains visibility into the spending of companies that use its products. Companies who asked that their data not to be shared were not used, and any company that does not wish to share its data for future aggregated analysis may request to exclude it from being shared in the aggregate.