Last Saturday morning (at least in my time zone) I received an email from IBM’s cloud PR team breathlessly announcing that “The numbers don’t lie — IBM Beat Amazon in 2013; AWS Revenue is Cloudy at Best”. The thrust of the email (and subsequent back and forth between myself and IBM) is that since Amazon includes a bunch of other revenue centers as well as AWS in their “other” revenue category, and that the entire “other” revenue line from the recent earnings was only $3.9B, that IBM’s own cloud revenue figure of $4.4B proves that IBM is, in fact, the leader in the cloud wars.
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First some clarification. In its January 21 analyst call, IBM CFO Martin Schroeter advised that the $4.4B figure, a 69% increase on the previous year, included only $1.7B in services. The subtext for that statement is that IBM believes a cloud business includes more than simply Infrastructure as a Service. IBM therefore includes private cloud, SaaS (marketing, collaboration, back office and other business apps) as well as its public cloud offerings in its cloud revenue figure.
What a tangled web – where to start?
IBM Acts Like A Spoilt Child That Didn’t Get Its Way
IBM is therefore pitching a story that is illusory – the cloud figure includes both cloud services, but also software delivered on the cloud. The way IBM runs its accounting actually makes sense – both sides of the cloud story are valid for IBM. What doesn’t make sense though is to conflate that aggregated revenue figure as some kind of justification for claims to be bigger and better than AWS. It’s completely an apples with oranges comparison that is meaningless.
Clearly IBM is on the offensive, in part due to the loss of the CIA private cloud contract to new arch-rival AWS. Commercial competition is a fact of life. trying to spin a nonsensical story into something with meaning however is not. This is especially strange given that IBM does actually have a compelling cloud story. Its software business (across the different functional areas) is a valid proposition. Additionally, other than in very rare cases like the aforementioned CIA deal, it doesn’t really compete with AWS for many workloads. AWS doesn’t do software and despite CEO Jeff Bezos dropping the “private cloud” term recently, it doesn’t really do private cloud either.
Given these facts, IBM’s almost perverse fascination with AWS is, frankly, weird. They’d be much better off in my view concentrating on what is important. They provide compelling solutions to large enterprises and, to be honest, those same enterprises will I’m sure find this IBM onslaught on AWS a little distasteful.
So is IBM the only guilty party here? Nope.
AWS Should Just Get Over Itself
Amazon has an almost religious fervor about keeping AWS financials obfuscated from the world. This is a strange kind of a situation. AWS is hands down the highest profile public cloud vendor. Everyone knows that public cloud is big, but has only just started gaining critical mass. No analyst worth their salt would regards a lower-than-expected AWS number as an indictment of either AWS or the public cloud per se. On the other hand a higher-than-expected AWS revenue figure simply validates what everyone has been saying – that AWS is the undisputed leader in the public cloud.
So why the mystery? It stems back to the operating DNA of Amazon. The company is notoriously secretive, indeed recent reports suggest that this secrecy and silo-mentality extends to being very shy to contribute to open source initiatives and, when the company actually does so, hiding the fact that it’s an AWS contribution.
Frankly, Amazon needs to get over itself. It achieves very little by hiding the truth, save from inviting unnecessary and generally damaging little cat fights like that we saw last week. Simply opening up about AWS’ financial performance would help all of us. In AWS’ latest earnings call, the closest we got to an answer to that question was form CFO Tom Szkutak who said that analysts:
…should assume when you look at the North American Growth for Q4, our AWS revenue is growing at a faster rate than other
Cool. So a number we don’t know the measure of is growing faster than some other numbers we also don’t know the measure of. Fan-bleeding-tastic.
In AWS’ defense, this revenue-envy fight was started by IBM. AWS has in fact been very restrained despite lots of prodding by big blue. But this is one example were restraint is probably unnecessary. Open up, tell the world AWS’ revenue and be done with this little drama once and for all.
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