Microsoft, AWS, and IBM Cloud Strategies and Their Impact on IoT

In 2014, cloud service providers were not on the radar of many enterprises pursuing Internet of Things (IoT) projects. In the last five years, however, there has been a complete change in awareness of the cloud and IoT, to the point that cloud service providers have become the starting point for many firms’ IoT solution journeys. There are four reasons for this:

• Growth in Use of Cloud Services: More and more firms are taking advantage of the reduced Capital Expenditure (CAPEX) and Operational Expenditure (OPEX) costs afforded by use of public cloud services. The public cloud was first used for less critical data storage needs, but now firms are considering it for more sensitive data and application workloads. Demand for the latter activity is also driven by the availability of private and hybrid cloud services.
• Cloud IoT Services: Cloud providers have grown their portfolios of IoT services, starting with data ingestion services but quickly adding messaging services, dashboarding, data management, and a range of analytics services. Cloud providers are also extending their IoT reach beyond the cloud to edge applications and services for devices with smaller footprints.
• Vendor Community Support: The growing use of cloud services is driving the IoT supplier community to anchor its services around one or a few cloud suppliers. This is because, for many IoT services in areas of device-to-cloud platforms and analytics, data is either a key output (IoT Platforms) or a key input (analytics), with cloud suppliers providing the data storage. In addition, vendors in these services need to be able to support their customers, who may already have preferred cloud providers. Many of these vendors are increasingly building their services to support or augment what cloud vendors already offer. The growing IoT partner ecosystem of the cloud providers further supports enterprise use of the cloud for IoT projects.
• Growing Clout of the Information Technology (IT) organization and the Chief Information Officer: Since IoT is about connecting things, IT organizations played a smaller role in the creation of IoT solutions. Smaller deployments and early IoT customers, such as utility providers, could use their own data centers for IoT data storage as well. However, the strategic importance of IoT for enterprises is driving businesses to centralize leadership of enterprise transformation initiatives around IT organizations that are increasingly leading IoT projects and choosing supporting technologies. IT is the organization with the closet ties to cloud providers.

Amazon Web Services (AWS), Microsoft, and IBM are three cloud vendors pursuing the IoT market. Their different histories, choices of products, and Go-to-Market (GTM) strategies have impacted their relative successes in IoT.

• AWS: In 2015 AWS launched AWS IoT, led by its data ingestion service for IoT endpoints. Since its initial launch, AWS has added new services to address the changing needs of IoT, such as AWS IoT Greengrass, AWS IoT Device Management, and Amazon Timestream for analytics on real-time streaming data. Within its IoT category, AWS now offers nine IoT-focused services. Overall, AWS’s IoT strategy is to maintain its position as the least expensive provider of data storage and compute services with the goal that more enterprise data usage will drive adoption of other AWS services.
• Microsoft: Azure jumped into the IoT market at nearly the same time as AWS and led with its own data ingestion service, called IoT Hub. While it has competed with AWS at the cost level for compute and storage services, Azure also brings to the table a different set of assets that serve enterprise end users: its Microsoft Office productivity software suite and the cloud equivalent, Office 365; .NET and Visual Studio, which are leading application development environments and support enterprise applications under the Microsoft Dynamics brand; and Microsoft’s Windows operating system, which supports many industrial products. These three products extend Microsoft’s reach across the enterprise and are top line items in enterprise IT budgets. Microsoft has used this footprint to drive the adoption of Azure computing services for IoT workloads by bundling Azure with other Microsoft products at attractive price points.
• IBM: IBM has been offering IoT services since 2015, again starting with its own IoT Hub. IBM Bluemix was the portal that offered the full IBM software and services portfolio, including IoT. IBM has been slower to build services that explicitly serve the IoT market, particularly lower in the IoT stack; even today many services in its IoT category are from third parties. One of the early criticisms of IBM’s IoT approach was that the cost of creating more sophisticated IoT applications was not worth the value relative to the services of other IoT platform and service providers. This issue was likely due to IBM’s early strategy of leveraging Bluemix to drive custom engagements. IBM Bluemix has now been rebranded as IBM Cloud, and IoT services have been rebranded under the Watson IoT Platform. Analytics is a key area of focus for IBM, including IoT. Over the last several years IBM’s IoT marketing has focused on use cases and benefits with a heavy emphasis on partnerships leveraging Watson analytics services.

AWS’s success is very much reliant on the success of public cloud for gaining share of IoT workloads because it does not offer any private and hybrid cloud services like its competitors.  AWS is trying to offer products that serve enterprises seeking private and hybrid cloud services, but not to the same level as other cloud suppliers. For instance, AWS launched AWS Storage Gateway for enterprises that are not ready to release certain workloads to the cloud.

However, it is clear that AWS does not believe one of the perceived disadvantages of the public cloud—data privacy and security—will hold in the long run. Some regulated industries and vertical markets, such as banking, certainly have a preference for greater control over their data, but it is not clear that public cloud services are any better or worse than enterprise data centers on various levels, public cloud security is continuing to improve, and the financial benefits of public cloud services are a huge advantage over on-premises, private, and hybrid offerings. The financial incentive of public cloud services and the belief that public cloud security is not better or worse than other offerings is a key reason AWS will continue to attract IoT workloads to its cloud services.

Microsoft will continue to enjoy success in IoT workloads based on the industrial IoT hype that has taken over the market, and is also strengthening its product offering and plugging holes to secure greater adoption of IoT services. It continues to invest in security and the edge, with its latest offerings including Azure Sphere and IoT Edge. Its Microsoft Central offering, which builds off of its Solair acquisition, helps ease IoT application adoption by simplifying IoT solution creation and integration with other IoT services.

Of the three cloud suppliers featured in this ABI Insight, Microsoft is probably doing the best job of meeting the IoT solution needs of enterprises along all stages of the IoT maturity curve. IoT Central makes it easy for enterprise business units and smaller businesses to experiment and scale an IoT application. Pricing is graduated based on numbers of connected devices starting at less than five devices per month. As companies grow more comfortable with IoT, Azure has a number of services, some already in use by enterprise, to create more sophisticated and integrated applications and more advanced analytics outcomes. Microsoft’s completeness of IoT products and services, particularly for industrial markets, will drive the growth of core cloud services for IoT workloads.

IBM is the most interesting of the three cloud providers. Their success in IoT will not come as quickly, due in part to the momentum of AWS and Microsoft. In addition, IBM’s strong position for serving businesses that are spreading themselves across multiple cloud vendors and types does not necessarily mean it will improve adoption of their cloud services for IoT applications. To date, suppliers across the IoT value chain have seen less interest in multi-cloud services for the rollout of IoT solutions. Indeed, most IoT deployments start small and therefore enterprises are trying to keep the solution simple, typically among only a few vendors.

However, the cloud market is set to become more complex with the growth of hybrid and multi-cloud markets, and IBM’s orchestration services that span cloud boundaries, application development, and Watson analytics will find traction and support the growth of its IoT revenues. Other drivers moving IBM forward in IoT adoption will be IBM’s Global Business Services (GBS) unit for helping customers optimize cloud services and its recent moves to make Watson Artificial Intelligence (AI) services available across other cloud environments. At IBM’s Think Conference in May 2019, CEO Ginni Rometty announced Watson AI will become available to data stored in Google Cloud, AWS and Azure. IBM’s ability to orchestrate data flows across multiple cloud platforms will enable the creation of supercharged analytics applications already built from its sophisticated AI and analytics services.