Azure surpasses AWS for some enterprise cloud uses

Flexera's new 'State of the Cloud Report' puts Azure ahead of AWS for the first time as enterprise IT pros' preferred public cloud, but analysts say AWS still leads the market.

A recent survey of cloud decision-makers showed that enterprises have begun to turn to Microsoft Azure as much as or more often than AWS.

The accelerated migration of on-premises workloads to the cloud during the pandemic helped Microsoft Azure edge past archrival AWS in several major categories, according to the Flexera 2022 State of the Cloud Report.

For the first time in the report's 11-year history, enterprise IT pros surveyed said they preferred Azure (77%) over AWS (73%) as their public cloud provider over the past year. Those surveyed also preferred using related tools such as Azure Resource Manager templates (52%) over AWS CloudFormation templates (51%).

In late 2021, Flexera surveyed 753 cloud decision-makers in companies ranging from 100 to 10,000 employees, with 79% employing at least 1,000 and 31% employing more than 10,000 people. Survey respondents were sourced from a pool of participants independent from Flexera customers and prospects, the company said.

Brian Adler, Flexera's senior director of cloud market strategy, was not surprised to see Microsoft surpass AWS in some categories of cloud usage. Respondents to previous surveys showed increased interest in adopting Azure as part of their future plans.

"Planning leads to experimentation," he said. "Experimentation shows them what the true benefits of a technology are, and they tend to continue using it."

Chart showing Azure vs. AWS public cloud adoption in 2021

Another contributing factor in Azure's steady rise among enterprise cloud users has been the consistent technical improvements to key offerings, including the Azure Resource Manager. It "wasn't a great product when it was first introduced" and had limited uses, which kept adoption numbers down, Adler said. But the technological improvements, Microsoft's sales team getting more "dialed into" the marketing message of the product, as well as users' heavy investments in other existing Microsoft products aided in Azure's breakthrough.

Customers already use all these other Microsoft products, so it's not a big risk to give something new a try. I see them [surpassing AWS] as an eventuality. This past year happened to be the year that eventuality became reality.
Brian AdlerSenior director, cloud market strategy, Flexera

"I call it the Trojan horse of Microsoft," Adler said. "Customers already use all these other Microsoft products, so it's not a big risk to give something new a try. I see them [surpassing AWS] as an eventuality. This past year happened to be the year that eventuality became reality."

AWS still leads overall cloud market

While those Flexera surveyed showed a preference for Azure and some Azure tools, analyst firms report that AWS remains in the lead overall.

IDC's Worldwide Semiannual Public Cloud Services Tracker for the full year 2021 showed AWS holding a 47% market share of the public cloud IaaS (compute and storage), with Microsoft a distant second at 14%, said Andrew Smith, research manager at IDC's cloud infrastructure services practice.

Rob Strechay, senior analyst at the Enterprise Strategy Group (ESG) observability, cloud and IT practice, agreed with IDC's findings, saying a wide gap continues to exist between AWS and Azure in the IaaS market.

"I don't think there's any way [Azure] is within 10 percentage points of AWS ECS," Strechay said. "But then it depends on what people you talk to in these surveys."

In its surveys of IT executives, ESG takes into account the market share of not just IaaS, but also SaaS offerings, which in the case of Azure includes the hefty revenues of Office 365.

"Azure's gateway workload tends to be Office 365, which represents the bulk of Azure's revenues," Strechay said. "AWS has always been focused on infrastructure-as-a-service and platform-as-a-service services such as Amazon EC2 compute and S3 storage."

In its survey, Flexera asked about IaaS and PaaS public cloud use, but not SaaS applications such as Office 365, according to Adler.

"If a respondent was confused about Office 365 and thought it was included in IaaS or PaaS, then it was included, but that's pretty unlikely," he said.

SMBs increase cloud spending, choose AWS

While Microsoft surpassed AWS in some cloud usage categories in Flexera's survey, SMBs said they preferred AWS (41%) over Azure (31%) as their public cloud provider, with Google Cloud Platform finishing third (21%). Respondents among the smaller IT shops also indicated the most interest in using the Google Cloud Platform in the future (9%), compared with 11% for Azure and 7% for AWS.

The survey showed that some 53% of SMBs invested more than $1.2 million in cloud technologies, up from 38% the previous year.

Part of the cloud spending increase for SMBs and enterprises can be attributed to hiring. Companies that invested in cloud needed to hire more experienced personnel to help build and implement new cloud technologies. This was not an easy task given that the need for such talent was expanding faster than the existing talent pool available, according to Adler.

Also contributing to the rise were heavier investments in the hardware necessary to run cloud-based workloads faster and more efficiently. Many smaller IT shops delayed investing in new server hardware, choosing to eke the most out of their existing systems for far too long.

"Many [SMBs] got to the point where they couldn't use their old and decrepit systems anymore," Adler said. "They decided they had to get serious to make this cloud thing happen and realized this is the time to make a significant push into the public cloud."

A major factor driving up cloud spend for both large and small companies is the growing reliance on the public cloud as those companies create more mission-critical applications that exploit the capabilities of the public cloud. Flexera said 8% of all respondents spend more than $60 million each year on the public cloud, with over half spending more than $2.4 million.

Enterprises increase cloud spending, security

Among enterprises, public cloud spending is even higher. Some 37% of enterprises said their annual spend is more than $12 million a year, with 80% spending more than $1.2 million a year.

Despite the more aggressive spending and increased cloud knowledge gained by both larger and smaller organizations, the same year-over-year challenges remain. For the 10th time in 11 years, security continues to be the most challenging obstacle IT professionals face, rising from 81% to 85% in the past year. The next significant challenge is the lack of resources and level of expertise (83%), which also made large jumps over the past year.

"Security is always the toughest challenge," Adler said. "But the lack of skilled resources jumped from fifth place to second this year. Much of this has to do with companies expanding their cloud usage and needing more experienced people."

Other challenges that all organizations face include cost and governance (77%) regardless of an organization's level of cloud usage. As cloud real estate expands, IT departments need better governance controls to maintain visibility into cloud systems. This expansion also brings more workloads with it that, in turn, bring more cloud-related compliance mandates.

While COVID-19 played a role in the increased use of clouds, it didn't do so as much as was initially predicted, the report concluded. Some 66% of respondents said cloud usage is higher than initially planned over the past year, although 90% had predicted higher usage when asked to predict last year.

The report also showed that organizations are becoming more comfortable putting sensitive information in the cloud, which indicated growing confidence in the improvements made in cloud security software. Over half of respondents are now considering moving at least some of their sensitive consumer data or corporate financial data to the cloud, according to Flexera's report.

As Editor at Large with TechTarget's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.

ESG is a division of TechTarget.

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