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Cloud computing has become common in enterprise IT, and the hype around it remains as adoption soars. Research by IDG shows that 70 percent of enterprises currently use at least one cloud application, and in 2018, organizations with cloud-only IT infrastructure will become the majority. The global market for cloud services was worth $148 billion in 2016, according to Synergy Research Group, and it is growing by 25 percent annually. Amazon Web Services (AWS) alone reached $3.23 billion in revenue in the third quarter of 2016, while Microsoft Azure, the second-largest cloud provider, announced Thursday that revenue has nearly doubled in the past year, giving it an annual run rate of $14 billion.
A key product from business software giant VMware is on track to bring in $1 billion this fiscal year, chief executive Pat Gelsinger said on Thursday. The product, NSX, announced three years ago, pools networking hardware like routers and switches and allows them to be reconfigured and managed via software. Customers who use the product or rival software don't need to buy new hardware as their needs change as had been the case in the path. NSX is an outgrowth of VMware's $1.26 billion acquisition of Nicira in 2012. Last year, VMware said NSX, was on track to be a $600 million business, so it's on a good trajectory, according to VMware.
At first, it's all about cost savings -- avoiding up-front fees, hardware costs, and ongoing maintenance and software upgrades. But looking beyond the operational concerns with cloud computing, things get much more interesting. Cloud really begins to shine when it becomes an enabler for increased business opportunities, and expanded horizons. The challenge is measuring, or at least understanding, the gains. Incremental savings from moving an application off a local server to a cloud site are easy to capture and document. But how do you measure increased agility? How do you measure the ability to pivot to new business opportunities? How do you measure an increased capacity for innovation? These gains can't be properly measured using traditional return on investment measures. The sole indicator is how a bundle of initiatives, supported through a forward-looking and visionary corporate culture, translates into increased revenues.
Software giant Microsoft's (NASDAQ: MSFT) stock rose about 2.3% on Friday after the company reported better-than-expected fiscal 2017 second-quarter results. Adjusted earnings per share (EPS) of $0.83 on adjusted revenue of $25.8 billion were 6% and 2%, respectively, better than analysts' consensus estimate for the quarter. But there's a more interesting story from the quarter than the company's market-beating financial results. Microsoft's cloud-computing business, Azure, which competes directly with Amazon.com's (NASDAQ: AMZN) Amazon Web Services (AWS), saw its revenue skyrocket 93%, or 95% in constant currency.