The cloud-computing market is set to double to $116 billion by 2021 — these 3 charts show why that's probably good news only for Amazon, Google, Microsoft, and Alibaba

  • The cloud-computing market should continue to grow at a rapid pace in the coming years, Goldman Sachs said in a new report.
  • But the market is already dominated by four big firms: Amazon, Microsoft, Google, and Alibaba.
  • The opportunity for other players is rapidly closing, Goldman Sachs said.

It's still early days in cloud computing, the hottest sector in the gigantic business-technology market. But the window of opportunity for companies to grab a piece of it is closing fast.

That's the word from Goldman Sachs, which just released its quarterly report on the cloud market. The good news — according to the analysts Heather Bellini, Heath Terry, Piyush Mubayi, Caroline Liu, Mark Grant, and Ted Lin — is that the market for cloud services will continue to grow by at least 20% a year through 2021.

The bad news? A growing percentage of that spending will go to just four players: Amazon, Microsoft, Google, and Alibaba.

"We continue to expect that the public cloud landscape will consolidate into an oligopolistic market structure," the Goldman Sachs analysts said in the report.

Amazon pioneered the cloud-computing market when it launched Amazon Web Services more than a decade ago. Though AWS has since grown into a multibillion-dollar behemoth, the overall market is still a nascent one, Goldman Sachs said in the report. Many companies still haven't shifted over to the cloud, and most enterprise spending is still on traditional services.

The core cloud-computing market is expanding rapidly

The analysts focused on the core cloud services — infrastructure as a service (IaaS), where companies such as Amazon offer computing processing power, and platform as a service (PaaS), where Microsoft and other companies offer a kind of cloud-based operating system on which people can build and run applications — as well as the non-cloud enterprise-tech services with which they directly compete.

The combined amount that companies spend on cloud services and on the non-cloud ones that are direct competitors represents the total potential market for cloud services.

As cloud spending expands, it does so in part by eating into money companies used to spend on such things as maintaining and running applications on their own servers.

Last year, spending on cloud services accounted for about 8% of the total potential market. That should jump to about 15% by 2021, Goldman Sachs estimated. In other words, a growing portion of corporate IT budgets is likely to go to the cloud.

"Our checks continue to suggest that we remain in the early innings of public cloud," the analysts said in their report.

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That trend represents a big move in real dollars as well as percentages. Enterprise companies spent about $47 billion last year on the core cloud services, according to Goldman Sachs. The firm expects that amount to grow to $62 billion this year and to $116 billion by 2021.

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But the top 4 firms are leaving little room for other players

Frequently, with a rapidly expanding market there's room for plenty of competitors to flourish. But that's not what Goldman Sachs expects.

The cloud market has already started to consolidate, and that trend will only become more pronounced in the coming years, the analysts predicted. Basically, only the biggest players — Amazon Web Services, Microsoft Azure, Google Cloud, and the Chinese giant Alibaba Cloud — have the resources to offer differentiated services and continue to build out the data-server infrastructure needed to compete, they said.

Read this: Google just named a former Oracle exec as the head of its giant cloud business

Last year, Amazon, Microsoft, Google, and Alibaba accounted for about 56% of the core cloud-computing market. By next year, their combined share should hit 84%, according to Goldman Sachs' forecast. The three American giants alone will account for 77% of the total market, the analysts said.

"The largest three players (AWS, Azure, Google) will continue to dominate share of the market," the analysts said.

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While the biggest players would see their revenue go up, the amount of revenue going to the rest of the players in the cloud market would decrease, despite the market's overall expansion. While companies other than the big four pulled in about $21 billion by offering core cloud services last year, that amount will decline to $20 billion this year and just $12 billion next year, Goldman Sachs projected.

That could be ominous for IBM, Oracle, and other companies that have been trying to edge into the cloud-computing market. If Goldman Sachs is right, they're going to be left fighting for fewer and fewer table scraps left by the cloud giants.

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