Analysis: IBM and Oracle are tens of billions behind Amazon, Google, and Microsoft in CAPEX, and grow much slower in cloud infrastructure from a much lower base
In previous installments (2017, 2018) of Follow the CAPEX™ (merch store opening soon!), we've looked at the capital expenditures behind … Tweets: @jonathansorum , @timsneath , @charlesfitz , @jaypipes , @timoreilly , and @marypcbuk Tweets: Jonathan Sorum / @jonathansorum : CAPEX is a leading indicator of 1) building scale that competes 2) customer demand “Amazon, Google, and Microsoft each spent more on CAPEX in 2017 than Oracle has in its entire history.” IBM is even worse off, nowhere near. Little doubt that #IaaS & #cloud is a 3 player race http://twitter.com/... Tim Sneath / @timsneath : Favorite line: “That red line you may mistake for the x-axis is Oracle's CAPEX spending.” Great, snarky analysis by the master of platformonomics. #Cloud http://twitter.com/... Charles Fitzgerald / @charlesfitz : “In the cloud era, IBM's CAPEX is shrinking in both absolute and relative terms.” http://twitter.com/... Jay Pipes / @jaypipes : “Because, unlike marketing, CAPEX doesn't lie.” http://www.platformonomics.com/ ... Tim O'Reilly / @timoreilly : Great analysis of what the numbers show about IBM and Oracle's miserable showing in the cloud market. Excellent analysis! http://twitter.com/... Mary Branscombe / @marypcbuk : Follow the CAPEX: Separating the Clowns from the Clouds - Amazon, Google, and Microsoft each spent more on CAPEX in 2017 than Oracle has in its entire history. http://www.platformonomics.com/ ...
Context & Ripple Effects
This closes the loop on a capex-tracking series: earlier coverage tallied the $31.5B Amazon, Alphabet, and Microsoft jointly spent in 2016 and RBC's count of $63.8B across 19 cloud operators in 2017, and this installment splits that spending to expose who is actually in the race. The finding is stark — each of the three leaders outspent Oracle's entire historical capex in 2017 alone, with IBM further back still.
The significance is that infrastructure scale is being bought, not incrementally earned: the gap between the top three and the legacy enterprise vendors is measured in tens of billions of dollars of committed capital, which no quarterly earnings cycle can close.
First-order effects
- IBM and Oracle are effectively priced out of the IaaS tier — matching the leaders' build-out would require capex beyond anything either has ever spent, so their cloud revenue growth stays anchored to a much lower base.
- Enterprise buyers choosing infrastructure providers now face a de facto three-vendor shortlist for hyperscale workloads, since only Amazon, Google, and Microsoft are adding capacity at competitive rates.
Second-order effects
- Server, networking, and data-center suppliers see demand concentrate around three buyers, giving those customers outsized pricing power over the hardware chain while laggard vendors' orders shrink.
- IBM and Oracle are pushed toward differentiated niches — software, services, and hybrid positioning — rather than competing on raw capacity, ceding the commodity-infrastructure price war to the leaders.
Third-order effects
- Annual capex becomes the structural admission fee for cloud infrastructure, entrenching an oligopoly that later data confirms widened — Amazon alone spent $54B in 2020 as the leaders kept compounding their lead.
- The same capital concentration eventually provokes a buyer backlash: the a16z finding that 50 software companies could halve cloud bills by repatriating workloads shows the cost of this concentrated market feeding a counter-movement toward owned infrastructure.
The trend: Cloud infrastructure is consolidating into a capital-arms-race oligopoly in which yearly capex, not technology or sales reach, decides who competes at scale.