Amazon at the top of the Cloud Market

On Thursday, Amazon released their financial performance numbers, and they proved that Amazon is at the top of the cloud market compared to their competitors. Though they are known as an online marketplace, most of their stock market returns and revenue has come from renting processing power to start ups and enterprises.

 

Amazon was the leader in popularizing the cloud-computing field, and for a while they were the only ones to offer such services. This allowed for them to gain an advantage when others began to offer cloud-computing services. Others saw this field as an opportunity to tap into hundreds of billions of dollars. Microsoft has been especially committed to advancing in the field.

 

Though Amazon is the leader by a long shot, its resources are much lower than its competitors who have billions of dollars stashed away. Cloud computing demands heavy investments to set up data centers around the world as well as research and development if the field is to continue to grow and advance.

 

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In their first quarter reports, Amazon Web Services reported earnings of $1.57 billion and their operating income was $265 million. These statistics are strange coming from a company who often reports losses. This drove Amazon shares up by more than 6% in after-hours trading, and stock is at an all time high.

 

Microsoft, who ranks in at number 2 for cloud computing, reported that its annual revenue from its commercial cloud business would be $6.3 billion based on recent performance. Amazon predicted a similar figure of $5.16 billion. However, included in Microsoft’s number is revenue from different online applications. Azure, the Microsoft equivalent of Amazon’s cloud services, was estimated to be one-tenth of AWS.

 

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AWS got its start about a decade ago as a way to provide computing power to different divisions of Amazon. It has such a positive impact that it then was being offered to start-ups struggling to scale. After this, Amazon focused on expanding market share like it usually does, and it worked.

 

AWS was expected to rival the other businesses within Amazon. The cloud business has been growing by roughly 40% per year, which is twice the rate of the company overall.

 

Recently though, Google’s cloud service has been competing with AWS on pricing, which has been hurting profitability. Amazon has tried cutting prices many times at the expense of revenue growth. Their solution has been to provide other services such as database software and analytics. Amazon has also increased the number of resellers.

 

The big battle is going to be getting to the large companies that have the largest cloud computing needs.  Many companies just floated through the first years of the cloud, they were not ones to adopt the latest technology. They had compliance and contracting processes to follow. Now, cloud computing is commonplace at these companies.

 

Microsoft’s cloud business has doubled in the last year. This is great considering how they have been suffering from low PC sales. Analysts believe that Microsoft has the edge in obtaining larger companies for clients. This is because they might be able to convince them to use their cloud services in addiction to the Microsoft products they already use. For start-ups though, cloud computing and AWS are synonymous.

 

The cloud computing market is going to continue to grow, and no single company can cover all aspects of it. It will be exciting to see where things go from here.

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Erin M
Erin M
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