Gartner has released its latest Magic Quadrant for cloud infrastructure and a service (IaaS) – and while Amazon Web Services (AWS) and Microsoft will continue to get the plaudits, the real story is to be found nearer the bottom left.

As per 2016, AWS and Microsoft are the only two companies in the ‘leaders’ zone, with Google pushing hard in the ‘visionaries’ side, with Microsoft moving closer to AWS in terms of completeness of vision year over year.

Yet while there were only 10 vendors in the 2016 analysis – with this publication noting a more mature market as a result – 14 companies appear this year. New players, and some old faces, appearing in this edition include Interoute, Joyent – acquired by Samsung in August – and Skytap in the ‘niche players’ section, as well as Alibaba Cloud moving straight into the ‘visionaries’ section, alongside the likes of IBM and Oracle.

Naturally, AWS and Microsoft noted their delight at their continued performance in Gartner’s analysis. “Every product planning session at AWS revolves around customers – we do our best to listen and to learn, and to use what we hear to build the roadmaps for future development,” said Jeff Barr, AWS chief evangelist in a blog post. “I strongly believe that this customer-driven innovation has helped us to secure the top right corner of the Leaders quadrant for the seventh consecutive year.”

Barr said that 90% of the company’s roadmap was through customer requests, while Microsoft noted that more than 90% of the Fortune 500 use its cloud services, adding that it was a leader in no less than 13 Gartner MQs. “We strongly believe that the momentum we’re seeing has been possible because of what Azure offers and stands for – a comprehensive and secure cloud platform across IaaS and PaaS, unparalleled integration with Office 365, unique hybrid experience with Azure Stack, first-class support for Linux and open source tooling, and a robust partner ecosystem,” wrote Venkat Gattamneni, Azure director of product marketing.

The cautions for Microsoft were broadly similar to last year – not being as completely enterprise-ready as it could be, with a focus on API enablement – while AWS again had a note of caution sounded out around ease of use as well as the fact it “has just begun to adapt to the emergence of meaningful competitors.”

Alibaba, however, was praised for its potential to ‘become an alternative to the global hyperscale cloud providers in select regions over time’, with Gartner also noting its ‘financial wherewithal’ to continue investing in new regions. The company announced plans to debut in India and Indonesia earlier this month, for example. Its weakness, according to the analysts, is lacking mind share and a ‘limited track record’ outside of China.

Read more: How AWS and Azure’s competition improves public cloud adoption

• Public cloud spending is predicted to grow quickly, attaining 16% year-over-year growth in 2017.
• Cowen’s AWS segment model is predicting Revenue and EBITDA to grow 25% and 26.8% annually from 2017 to 2022.
• Microsoft Azure is viewed as the platform that customers would most likely purchase or renew going forward (28% of total vs. AWS at 22%, GCP at 15%, and IBM at 10%).

These and many other fascinating insights are from Cowen’s study published this week, Public Cloud V: AWS And Azure Still Leading The Pack (58 pp., PDF, client access reqd.). Cowen partnered with Altman Vilandrie & Company to complete the study.

The study relies on a survey sample of 551 respondents distributed across small, medium and enterprises who are using public cloud platforms and services today.  For purposes of the survey, small businesses have less than 500 employees, medium-sized businesses as 500 to 4,999 employees, and enterprises as more than 5,000 employees. The study provides insight on a range of topics including cloud spending trends, workload migration dynamics, and vendor positioning. Please see pages 5,6 & 7 for additional details regarding the methodology.

The more AWS and Azure compete to win customers, the greater the innovation and growth in public cloud adoption as the following key takeaways illustrate:

Existing public cloud customers predict spending will grow 16% year-over-year in 2017

Existing mid-market public cloud customers predict spending will increase 18% this year. SMBs who have already adopted public cloud predict a 17% increase in spending in 2017, and enterprises, 13%. Public cloud providers are the most successful upselling and cross-selling mid-market companies this year as many are relying on the cloud to scale their global operations to support growth.

AWS dominates awareness levels with SMBs who have existing public cloud deployments, with Microsoft Azure the most known and considered in enterprises

Consistent with many other surveys of public cloud adoption, IBM SoftLayer scored better in enterprises than any other segment including SMBs (71% vs. 58%). Google Cloud Platform has its strongest awareness levels in SMBs, attributable to the adoption of their many cloud-based applications in this market segment. They trail AWS, Azure, and SoftLayer in the enterprise, however. Across all existing companies who have adopted public cloud, the majority are most aware of AWS and Microsoft Azure. The second graphic provides an overview of awareness across the entire respondent base.

Microsoft is the most-used public cloud and the most likely to be purchased or renewed by 28% of all respondents

While AWS is the most reviewed public cloud across all respondents, Microsoft Azure is the most used. When asked which public cloud provider they are likely to purchase or renew, the majority of respondents said Microsoft Azure (28%), followed by AWS (22%), Google Cloud Platform (15%) and IBM SoftLayer (10%). The following graphic compares awareness, reviewed and use levels by public cloud platform.

Only 37% of current Azure users expect to add or replace their public cloud provider, compared to 53% of current AWS users and 50% of GCP users

The study found that approximately 40% of respondents expect to add or replace their cloud provider in the next two years, compared to 43% who predicted that last year. Companies who have adopted Microsoft Azure are least likely to replace/add other vendors, as only 37% of current Azure users expect to add or replace, compared to 53% of current AWS users and 50% of GCP users.

AWS and Azure dominate all seven facets of user experience included in the survey

AWS has the best User Interface, API Complexity, and Reporting & Billing. Microsoft Azure leads all Public Cloud providers globally in the areas of Management & Monitoring, Software & Data Integration, Technical Support and Training &   Google Cloud Platform is 3rd on all seven facts of user experience.

18% of workloads are supported by public cloud today with SMBs and mid-market companies slightly leading enterprises (16%)

Overall, 38% of all workloads are supported with on-premise infrastructure and platforms, increasing to 43% for enterprises. The following graphic illustrates the percentage of workloads supported by each infrastructure type.

77% of existing public cloud adopters are either likely or very likely to add a SaaS workload in the next two years, led by mid-market companies (81%)

SMBs (76%) and enterprises (73%) are also likely/very likely to add SaaS workloads in the next two years. The majority of these new SaaS workloads will be in the areas of Testing & Development, Web Hosting, and e-mail and communications.

Cowen’s AWS segment model is predicting Revenue and EBITDA to have a five-year Compound Annual Growth Rate (CAGR) of 25% and 26.8% from 2017 to 2022

AWS Net Income is predicted to increase from $2.7B in 2017 to $8.2B in 2022, attaining a projected 24.5% CAGR from 2017 to 2022. Revenue is predicted to soar from an estimated $16.8B in 2017 to $51.5B in 2022, driving a 25% CAGR in the forecast period.

Both SaaS vendors and SaaS buyers are going “all-in” to hyperscale IaaS platforms such as AWS, which is disrupting the SaaS value proposition. Why should the enterprise SaaS consumer pay for the SaaS service if their data is resident in adjacent AWS S3 buckets? If both SaaS sellers and buyers are using the same cloud tools, automation and pay-per-transaction model offered by IaaS platforms, then why not host the “shrink-wrapped” software in the customers’ cloud? Further, serverless computing, cloud marketplaces and DevOps are changing the economics of hosting and delivering software.

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Artificial intelligence, machine learning, neural networks. We’re in the midst of a wave of excitement around AI such as hasn’t been seen for a few decades. But those previous periods of inflated expectations led to troughs of disappointment. Will this time be different?
Most likely. Applications of AI such as predictive analytics are already decreasing costs and improving reliability of industrial machinery. Furthermore, the funding and research going into AI now comes from a wide range of commercial firms. It’s not solely the province of relatively narrow government and academic research.
That said, it’s easy to look at wins in specific domains and generalize to an overly optimistic view of AI writ large.

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Gartner has predicted the global cloud-based security services market will hit $5.9 billion this year, saying the segment’s growth will ‘remain strong’.

The analyst firm looked at a variety of segments, with identity and access management (IAM), identity as a service (IDaaS) and user authentication remaining the biggest category. Gartner predicts this area to comprise $2.1bn, or 35.6% of the overall market, this year, going up to $3.42bn, or 38.3% of the overall $8.92bn market by 2020.

Secure email gateway ($702m) and secure web gateway ($707m) were the next largest categories, with the latter expecting to outstrip the former to the tune of almost $100m by 2020. Application security testing, at almost $400m ($397.3m) this year, leads the remaining categories, ahead of security information and event management (SIEM) at $359m and remote vulnerability assessment at $250m. Other cloud-based security services amounted to $1.3bn.

The announcement, which took place during the Gartner Security & Risk Management Summit this week, also examined the landscape for businesses of different sizes. SMBs are driving growth as they become more aware of security threats, while enterprises are also on board as they realise the operational benefits derived from a cloud-based security delivery model.

“Cloud-based delivery models will remain a popular choice for security practices, with deployment expanding further to controls, such as cloud-based sandboxing and WAFs (web application firewalls),” said Ruggero Contu, research director at Gartner.

“The ability to leverage security controls that are delivered, updated and managed through the cloud – and therefore require less time-consuming and costly implementations and maintenance activities – is of significant value to enterprises,” Contu added.

This complements a report issued by fellow analyst firm Forrester Research earlier this month, which said cloud security spending would hit $3.5 billion by 2021 at a 28% annual growth rate.