Macquarie Bank: AWS is five years ahead of rivals

Amazon Web Services is playing in a league of its own and only getting stronger, according to financial analysts at Macquarie Wealth Management.

The company has upgraded its revenue forecasts for AWS for 2014 from 65 percent to 71 percent based on the expectation of strong growth in the enterprise, according to a new research note to clients. It now expects the cloud leader to generate $5.72bn next year.

Macquarie, which had its analysts working the rooms at Amazon's recent re:Invent conference, said Amazon was three to five years ahead of its competitors.

"Relative to the traditional on premise enterprise technology stack, we see Amazon completely resetting expectations of price, service level and ease of use, which should provide deflationary to the entire software industry over time.

"We got a very clear sense that Amazon is playing in its own league in this industry."

Macquarie's view of the impact on some of the bigger names in the sector in less sanguine, suggesting that Oracle and IBM in particular are the most exposed to the changes wrought by AWS.

In many ways this gels with IBM's own behavior. The company is in the midst of a huge global restructure as it recalibrates for the cloud – one of its periodic company reinventions.

The outlook is better for Microsoft and Google, according to the money men. Both were highlighted by Macquarie's contacts as the most likely competitive threats in a three- to five-year timeframe, although in fairness to IBM there is support for its market position over the medium term as well.

According to the research authors: "It is Amazon's combination of services, robustness of the APIs, and reliability and performance that really drive differentiation, which we see only further distancing its lead over the competition."