A recent report published by Standard & Poor’s Equity Research Services on the computer software industry makes for interesting reading.
Zaineb Bokhari, Application Software Analyst authored the 47-page report. He has shown how the software industry is going through a fundamental restructuring due to the impact of SaaS, open source, and the many variations in licensing programs.
His analysis also shows how these factors taken together form a powerful catalyst of long-term disruption to business models. At one point, the study predicts the end of perpetual licensing due to the time-to-value contributions of SaaS-based applications. The report is available for download to Equity Research Services clients, including many college and university online libraries that have Standard & Poor’s subscriptions.
Here are the key take-aways from reading this report:
IDC expects the market for global packaged software to grow at a compound annual growth rate (CAGR) of 5.8% from 2009 to 2014. Over the same period, IDC projects software-as-a-service will grow at a 25.3% CAGR.
Standard & Poor’s reports that the SaaS category is still dwarfed by traditional packaged software, which IDC sized at $272 billion in 2009 (versus $13.1 billion for SaaS).
According to IDC’s forecasts, the size of the SaaS will rise from just under 5% of the size of the packaged software market in 2009 to more than 11% by 2014.
Standard & Poor’s expects corporate spending on enterprise software and related maintenance to grow in the low to mid-single-digit range (i.e., 3%–6%) in 2010, with some segments expanding at above-average levels.
Overall revenues from SaaS delivery models reached $13.1 billion in 2009, a growth rate of 34.2% from 2008 according to IDC. IDC expects this revenue to rise to $40.5 billion by 2014, a compound annual growth rate (CAGR) of 25.3%. This is dwarfed by the $272 billion that IDC believes was spent globally on software in 2009.
Application development and deployment is projected to have the most rapid growth of all segments, attaining a 39.2% CAGR from 2009 – 2014. Please see the table below, Worldwide Software-as-a-Service Revenues Forecast by Segment for a year-by-year breakout of this category.
Infrastructure software is forecasted to grow at a 27.4% CAGR through 2014, totaling 11,345 instances by 2014 according to IDC. The year-by-year breakouts are also included in the following table.
Applications are expected to have 20.4% CAGR through 2014 based in units and attain a 50.8% market share of all SaaS segments by 2014.
Bottom line: Enterprise software pricing models must change to stay in step with customers’ expectations of more value for their maintenance and licensing fees. The evolving economics of cloud and SaaS-based application deployment are in the process of permanently re-ordering enterprise software.
Updated 12 November 2026. This post first appeared on 17 November 2010 as a short note on Google App Engine and the Google Labs cloud APIs. It is the most visited page on this site this month. So the text below replaces the original with a Google Cloud technologies overview for 2026 and a look at 2027. The 2010 version is summarized in the first section for anyone who arrived looking for it.
Google Cloud by the numbers in 2026. Quarterly revenue and contracted backlog for the five quarters through Q3 2026, what each piece of the 2010 stack is called today, and the four figures that define the business at the end of 2026. Click any chart to open it full size. Sources linked below, analysis by softwarestrategiesblog.com.
Google Cloud reported $30.7 billion of revenue for the third quarter of 2026, up 103% from $15.2 billion a year earlier. Operating income reached $11.1 billion, a 36.2% margin, compared to $3.6 billion and 23.7% a year earlier. Contracted backlog stood at $561 billion at the end of September, up from $155 billion twelve months before. Alphabet expects to recognize just over 55% of it as revenue within 24 months. The business this post described in 2010 did not disclose revenue at all. In 2026 it is the fastest growing of the three largest clouds and Alphabet’s second largest source of operating income.
This Google Cloud technologies overview covers four things. It starts with what the 2010 stack looked like and what each piece is called today. It then works through the financial record from the first disclosure in 2020 to the Q3 2026 results. The third section compares Google Cloud with AWS and Microsoft Azure using Synergy Research Group’s Q3 2026 market data. After that comes the platform announced at Google Cloud Next in April 2026. The final section sets out what the backlog, capex guidance and competitor commentary already say about 2027.
What the 2010 Google cloud stack became
In November 2010 Google’s cloud effort was a developer evangelism program. The original post pointed readers to the Google Labs catalog and to a slide deck by Google developer advocate Chris Schalk. The deck covered Google Storage for Developers, the Prediction API and BigQuery, all three of them in preview. App Engine, launched in 2008, was the production product at the time. The post contrasted Google’s incremental approach with how often Amazon Web Services changed its platform, pricing and services. Google did not report cloud revenue then, since it had no cloud segment to report.
Almost every element of that stack still exists under a different name. Google Storage for Developers became Cloud Storage. BigQuery left preview in 2011 and now anchors what Google calls the Agentic Data Cloud. The Prediction API was shut down in 2018. Its role passed to Cloud Machine Learning Engine, then to Vertex AI in 2021, and in April 2026 to the Gemini Enterprise Agent Platform. Google Labs closed in 2011, and Google Cloud Next is where new services launch instead. App Engine, in fact, remains available inside Google Cloud. Google itself became a subsidiary of Alphabet in 2015. Alphabet first reported Google Cloud as a segment in February 2020, disclosing $8.9 billion of 2019 revenue. The 2018 figure was $5.8 billion and the 2017 figure $4.1 billion.
Two businesses that did not exist in 2010
The first is security. Google Cloud bought Mandiant in September 2022 for $5.4 billion. It then closed its $32 billion acquisition of Wiz on 11 March 2026, the largest purchase in Alphabet’s history. The second is custom silicon sold to customers rather than used internally. The Tensor Processing Unit did not reach outside developers until 2018. In 2026 Alphabet counts more than 100 significant TPU customers and sells TPU systems for installation in customers’ own data centers.
Google Cloud revenue went from $4 billion a year to $30.7 billion a quarter
Google Cloud segment revenue by year, from Alphabet’s 10-K and 10-Q filings. The segment lost money every year through 2022, earned $1.7 billion in 2023 and $26.5 billion in the first nine months of 2026. Sources linked below, analysis by softwarestrategiesblog.com.
Google Cloud revenue has grown every year since Alphabet began disclosing it. Segment revenue was $13.1 billion in 2020 and $19.2 billion in 2021. It then reached $26.3 billion in 2022, $33.1 billion in 2023 and $43.2 billion in 2024. Alphabet’s 2025 Form 10-K puts 2025 revenue at $58.7 billion. The first nine months of 2026 added $75.5 billion, more than the whole of 2025. At the Q3 2026 rate the segment is on a $123 billion annual run rate. That is roughly fourteen times the $8.9 billion it reported for 2019, before the segment turned a profit.
Profitability arrived later than scale. The segment reported operating losses in every year through 2022. It then earned $1.7 billion in 2023, $6.1 billion in 2024 and $13.9 billion in 2025. The first nine months of 2026 produced $26.5 billion, almost double the full year before, according to Alphabet’s Q3 2026 Form 10-Q. Operating margin moved from 5.2% in 2023 to 14.1% in 2024, 23.7% in 2025 and 36.2% in the latest quarter.
Growth accelerated for five straight quarters
The acceleration is recent and steep. Google Cloud grew 34% in Q3 2025 and 48% in Q4 2025. It grew 63% in Q1 2026, 82% in Q2 2026 and 103% in Q3 2026. Quarterly revenue went from $15.2 billion to $30.7 billion over those five quarters. Alphabet attributes the growth to Google Cloud Platform, and within it to AI infrastructure and enterprise AI solutions. Core GCP products grew as well, though more slowly. Eighteen Google Cloud product lines each generate more than $1 billion a year. About 90% of the Fortune 100 use Gemini Enterprise, according to the Q3 2026 earnings call.
Backlog grew faster than revenue. Remaining performance obligations are the contracted revenue not yet recognized. They went from $155 billion in Q3 2025 to $240 billion in Q4 2025 and $462 billion in Q1 2026. They then reached $514 billion in Q2 2026 and $561 billion in Q3 2026. At the Q2 call Alphabet said just over 50% of backlog would convert to revenue within 24 months. By the Q3 10-Q that figure was just over 55%. So about $309 billion of contracted revenue sits inside the next two years before any new signings.
Google Cloud gains share while AWS loses it
The three largest cloud providers in Q3 2026. AWS remains the largest, Google Cloud grows more than twice as fast as either rival, and Synergy Research has Google Cloud gaining three points of share in a year while AWS loses three. Sources linked below, analysis by softwarestrategiesblog.com.
Synergy Research Group puts worldwide cloud infrastructure services revenue at $167.7 billion for Q3 2026, up 55% from a year earlier. It was the twelfth consecutive quarter in which the growth rate increased. Trailing twelve-month revenue, as a result, reached $558 billion. Within that market Synergy has Amazon at 26% share, down from 29% a year earlier. Microsoft holds 19% against 20%, and Google 16% against 13%. Oracle, Alibaba, SpaceX and xAI, CoreWeave, Salesforce and Anthropic each hold between 2% and 4%.
The company results line up with the shares. AWS reported $46.0 billion of Q3 2026 revenue, up 39%. Its operating income was $17.8 billion, so its run rate is $184 billion at a 38.7% margin. Microsoft disclosed Azure revenue in dollars for the first time at $33.2 billion, up 48%, a $133 billion run rate. Google Cloud’s $30.7 billion, up 103%, sits $2.5 billion behind Azure and $15.3 billion behind AWS for the quarter. A year earlier the gaps were larger on every measure. Google Cloud was growing 34% then, while AWS grew 20% and Azure 40%.
Google Cloud’s margin now sits between its two rivals. AWS earned a 38.7% operating margin in Q3 2026 while Google Cloud earned 36.2%. Microsoft, by comparison, does not disclose Azure operating income. For comparison, Synergy’s Q3 2022 shares were 34% for Amazon, 21% for Microsoft and 11% for Google. Google has gained five points of share in four years while Amazon has lost eight.
The 2026 platform is built around agents and TPUs
Google Cloud Next 2026 ran from 22 to 24 April in Las Vegas. It drew more than 32,000 attendees and produced 260 announcements. The center of them was the Gemini Enterprise Agent Platform, the renamed and extended Vertex AI. It adds Agent Studio for building agents and an Agent Registry for cataloging them. Agent Identity gives each agent its own credentials, Agent Gateway enforces policy on every call, and Agent Observability traces what agents do. The point of the five components is that an enterprise can build, authorize, route and audit agents in one place rather than stitching controls together from separate products.
Infrastructure announcements followed the same theme. TPU 8t is the eighth generation training chip. It scales to 9,600 chips and 2 petabytes of high bandwidth memory in a single superpod. Google rates it at three times the compute of Ironwood, twice the performance per watt and 2.7 times the training performance per dollar. TPU 8i is the inference part, with 1,152 chips per pod and an 80% improvement in inference performance per dollar compared to the prior generation. Google also described Virgo, a custom network for connecting TPU supercomputers into larger clusters. The Agentic Data Cloud rounds it out. Its Cross-Cloud Lakehouse is standardized on Apache Iceberg, so BigQuery can query data where it sits, including data left in AWS.
The money behind the platform is unusually visible. Alphabet spent $51.4 billion on capital expenditure in Q3 2026. It held its 2026 guidance at $195 billion to $205 billion. Total Alphabet revenue reached $127.6 billion in the quarter, up 25%, with $40.6 billion of operating income. The Gemini app also passed one billion monthly users during the quarter.
Security is Google Cloud’s $37 billion acquisition story
Google Cloud entered security by acquisition. Mandiant, bought for $5.4 billion in 2022, brought incident response and threat intelligence. Wiz was announced in March 2025 for $32 billion and closed on 11 March 2026 for $29.5 billion after adjustments. It brought a multicloud security platform that Google has kept as a separate brand since the deal closed. Wiz still works across AWS, Azure and Oracle as well as Google Cloud. The purchase added $22.7 billion of goodwill to the Google Cloud segment. That is what Alphabet paid for the customer base, the engineers and the market position rather than the code.
The combined products now ship under Google AI Threat Defense. It pairs Gemini models with Wiz, Mandiant intelligence and the CodeMender code repair agent. Wiz, for its part, introduced Red, Blue and Green agents for offensive testing, defensive response and remediation. Google’s security blog describes the goal as an agentic security operations center. In it, agents triage alerts, investigate and recommend responses while analysts approve the steps. For readers of this site, that matters for one reason. The controls Google ships for its own agents, Agent Identity and Agent Gateway in particular, are the same controls enterprises need for agents built on any platform.
What 2027 already looks like
Three numbers already shape 2027, starting with the backlog. Just over 55% of $561 billion converts within 24 months, so roughly $309 billion of revenue is contracted before Google Cloud sells anything new. Spread evenly, that alone is about $155 billion a year, above the current $123 billion run rate. The second is capital spending, which is still rising. Alphabet told investors on the Q3 2026 call to expect capex to increase significantly in 2027. The 2026 range is $195 billion to $205 billion, and the Cloud segment carries much of the depreciation. Operating margin rose from 23.7% to 36.2% in a year while that spending ramped. The question for 2027 is whether margin keeps rising as the depreciation catches up.
The third is the competition’s own guidance. Amazon CEO Andy Jassy told analysts he expects AWS to grow more than 40% in 2027 and 2028. To keep gaining share, Google Cloud has to grow faster than that from a base now two thirds the size of AWS. Synergy’s data has the entire market compounding at over 50%. The test of 2027 is whether the three leaders can all grow above 40% at the same time. That has never happened at this scale.
Two other threads run into 2027. TPU systems are now sold into customers’ own data centers, with Oracle and Crux AI named as early buyers. That turns Google’s silicon into a product line rather than an internal advantage. Wiz plus Mandiant gives Google Cloud a security business that competes with CrowdStrike and Palo Alto Networks as much as with AWS. Neither chips for sale nor security acquisitions were part of the plan when App Engine was the product. The 2010 version of this post did not see either one coming.
Key takeaways
Google Cloud doubled in a year. Q3 2026 revenue of $30.7 billion was up 103% from $15.2 billion. Growth also accelerated in each of the last five quarters.
The backlog is the forecast. Contracted backlog reached $561 billion, with just over 55% converting within 24 months. That puts about $309 billion of revenue under contract for the next two years.
Margins moved from 5% to 36% in three years. Operating margin went from 5.2% in 2023 to 36.2% in Q3 2026, on $11.1 billion of quarterly operating income.
Google Cloud is the share gainer. Synergy Research puts it at 16% of a $168 billion quarterly market, up from 13%. AWS, in contrast, fell from 29% to 26%.
The 2010 stack survived under new names. Google Storage is Cloud Storage and BigQuery anchors the Agentic Data Cloud. The Prediction API’s role, in turn, now belongs to the Gemini Enterprise Agent Platform.
Security is a $37 billion acquisition story. Mandiant at $5.4 billion in 2022 and Wiz at $32 billion in 2026 gave Google Cloud a security business that sells across every major cloud.
2027 is a capex and margin test. Alphabet expects capex to rise significantly from the 2026 range of $195 billion to $205 billion. AWS guides to more than 40% growth, so share gains require Google Cloud to grow faster than that.
Dr. Ignacio M. Llorente leads the The DSA (Distributed Systems Architecture) Research Group at Complutense de Madrid and is one of the world’s leading lecturers and thought leaders in advanced distributed computing and virtualization technologies, architecture of large-scale distributed infrastructures and resource provisioning platforms. His thoughts and observations on the key research challenges on cloud computing are fascinating to read over.
Dr. Werner Vogel’s pre-recorded keynote for SC10 provides insights into the early adopters of the latest generation of AWS enhancements and additions. SC10 is the leading conference globally for high performance computing, networking, storage and analysis.
His co-presenter is Deepak Singh, Sr. Business Development Manager who describes the role of Hadoop MapReduce in the AWS strategy. At just over eight minutes, this keynote is worth watching for the insights and updates on the latest customer and technology news on AWS .
At the 7th Annual Cloud Expo held earlier this month at the Santa Clara Convention Center, Rex Wang of Oracle presented his company’s 2010 roadmap to Cloud Computing. Rex is the VP of Product Marketing with responsibility for cloud and grid computing, in addition to enterprise architecture, modernization and embedded systems.
Key take-aways from this presentation include the following:
28.6% of respondents have internal or private clouds today according to an IOUG Study cited in the presentation.
54.% of respondents do not use public cloud providers.
Financial & accounting (19.6%), HR (18.6%) and collaboration-based apps including e-mail (18.2%) are the three most common applications running on private cloud services
Oracle’s 2010 roadmap to Cloud Computing provides insights into how they are shaping their private cloud value proposition and selling strategy around Exadata, Exalogic, and WebLogic. Oracle clearly sees private clouds dominating.
Bottom line: The future of cloud architectures will be much more hybrid in structure and scope, as every enterprise has legacy data that cannot be easily moved into private clouds. Add in the complexity of aggregating and normalizing unstructured content, and the direction of cloud architectures will be more hybrid, less private, over time.
In August, 2010 Cisco completed a study that included interviews with 80 enterprise IT decision makers (CIOs, CTOs, and infrastructure VPs) from 43 enterprises and public-sector organizations across industries throughout the US, Europe and India. In addition, Cisco completed one-one-one interviews with 20 subject-matter experts.
The primary focus of the study was on the adoption of the public cloud for enterprise applications. The report Network Service Providers as Cloud Providers Survey Shows Cloud Provision Is a Bright Option can be downloaded here.
Key Take-Aways:
Cisco forecasts that the global market for Cloud Computing Service Revenue will be $43.8B by 2013, with SaaS contributing $29.5B, or 6 7%. Workload migration will also be the greatest in that segment as well. The study provides additional insight into the IaaS and PaaS key success factors and the implications network service providers. (Click on image to expand it for ease of reading).
The study found that in the Business Processing segment, the greatest near-term opportunity is in SaaS-based ERP, which according to this study is predicted to reach a 13% adoption rate by 2013. This is consistent with International Data Corporation estimates of SaaS-based ERP adoption in comparable time periods. ERP’s growth on the SaaS platform continues to be constrained by lack of Master Data Management (MDM) functionality, lack of a pervasive mobile APIs on the several SaaS ERP systems launched, and concerns over security of costing. ordering, production, and quality management data. (Click on image to expand it for ease of reading).
Last month Amazon Web Services launched Micro Instances for EC2, the lowest-cost instance type they have offered to date. A Micro instance includes 613MB of memory and can support 32- and 64-bit platforms on both Linux and Windows operating systems.
The pricing begins at $0.02 per hour for Linux and $0.03 per hour for Windows. In addition, a Micro instance supports Amazon Machine Image (AMI) for defining applications, data structures and databases in addition to configurations. Amazon is also including a templated image to get up and running quickly with a Micro instance as well.
Greg Wilson, who is a Sr. Technical Evangelist for Adobe Systems, produced one of the best tutorials and test drives available, which is shown below. He has also written a blog entry regarding lessons learned which can be found at My dive into the world of Amazon EC2 and the new crazy cheap Micro instance.
Bottom line: Micro instances are going to shift cloud-based development away from compute- and data-intensive application development to smaller applications and web services. Given the price point, the use of Micro instances could lead to a proliferation of new low-end, utilitarian-like applications as well.
For all the hype and millions spent entertaining customers, analysts and the press at OpenWorld, Oracle isn’t really breaking new ground here. They are taking their enterprise model and shifting it not to a cloud strategy, but an enterprise stack. The following video is excellently done by IDG and worth watching.
Bottom line: Cloud-based applications combined with the ability to measure program and strategy results are accelerating the efficiency and focus of marketing, bringing an entirely new level of intensity to this area.
The following presentation from Amazon Web Services’ (AWS) Jinesh Varia includes an update on the Alexa GrepTheWeb Service and an excellent overview of AWS components. There is also an update on the AWS cloud architecture and definition of the Compute (EC2), messaging (SQS) and Storage (S3, Simple DB, and EC2-EBS) component integration.
Finally there are an interesting series of slides explaining courses at University of California, Santa Barbara and Stanford University on how AWS is being used to teach data mining and related topics.
This presentation also provides insights into how configurations of AWS can be customized for data mining and content management.
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