Cloud is one area that is not only growing rapidly but also helping big companies like Amazon.com, Inc. (NASDAQ:O:AMZN), Microsoft Corporation (NASDAQ:O:MSFT) and International Business Machines Corp. (NYSE:N:IBM) to post better results. In fact when it comes to cloud computing, the market defies every expectation. However, Amazon Web Services not only helped its firm to post profit than suffer a loss in the recent quarters but also established a clear leadership over others by a wider margin. While there are ample opportunities for everyone to grow, the online marketplace firm is sitting pretty to remain in the top position for a longer period. Let’s look into why and how the company, which was not in the technology field ten years back, can give a tough competition to the established tech firms.
Computing Infrastructure
It is a well-known fact that Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL)’s Google (O:GOOGL) have created computing infrastructure. These three firms have made known their objectives to support websites, as well as, services as the concept is ‘hyperscale’ in cloud computing. That is because of the fact that these companies use bigger data centers with a focus on more efficiency than any data center or server room, which other firms can create or manage on their own. Currently, these companies rent out some of their capacity to companies, as well as, developers who may not necessarily have to be in the United States. That meant it was available to everyone throughout the world. As a result, any firm or developer can easily get access to the basic unrestricted computer power by swiping a credit card.
The advantage of cloud computing is that it comes at a much cheaper rate, and at the same time at an increase pace of availability, as well as, performance. Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL)’s Google provide two layers of cloud computing. One is Infrastructure-as-a-Service (IaaS) and the other is Platform-as-a-Service (PaaS). The former, which is considered as a basic layer, enables enterprises or anyone to establish virtual servers to store their data in the data center of someone else. PaaS is nothing but a set of tools, as well as, services to make simple for developers to create apps without bothering about the servers. There is also another layer, which is ‘Software-as-a-Service’ (SaaS) where the online retailer is not present.
Grown To Big From A Small Venture
Amazon.com, Inc. (NASDAQ:AMZN) has understood the needs of the small enterprises, as well as, smaller developers and focused on them. These sections needed a cost-effective way to either manage their simple website or test things as they keep developing different apps. However, that did not prevent them from offering its AWS to bigger firms like Netflix, Inc. (NASDAQ:O:NFLX), Airbnb and Slack. Significantly these companies came to the online marketplace firm for running small experimental apps. However, they have turned their experimental apps in AWS into building the central part of their booming businesses. These companies appeared to have been satisfied with the costing, as well as, the services.
Ten years ago, Amazon.com, Inc. (NASDAQ:AMZN) started it and preferred to retain its performance close to its chest until the current year’s financial performance. However, it was clear about one thing. At a time when everyone was avoiding the cloud terming it as a novelty and fad but lacks security, the online retailer took some bold initiatives to push its AWS slowly and steadily. That helped it reach where it is currently while big companies avoided pushing it for fear of losing revenue from other streams. For instance, Microsoft Corporation (NASDAQ:MSFT) might lose revenue from license if the enterprises turn towards the cloud. However, it helped developers more than the businesses, which were somewhat skeptical initially. According to Forrester Research Principal Analyst, Dave Bartoletti, the early entry, and the rise were due to developers creating new apps.
Beyond The Startups
Amazon.com, Inc. (NASDAQ:AMZN) gained from revenue generated from early customers to invest further into the cloud modules. That included more features for enterprises besides higher performance services. The objective was to draw the attention of the developers to try even bigger apps shedding the image of AWS for experiments and startups. That enabled the company’s AWS to grab customers like Comcast Corporation (NASDAQ:O:CMCSA), Central Intelligence Agency, and Capital One Financial Corp. (NYSE:N:COF). These customers use AWS for some of their computing infrastructures. Now, the service is on top of the mountain, and the growth is wider than its rivals. Gartner Inc’s (N:IT) Research VP of Cloud Services, Ed Anderson said that everyone came when the company established it.
Currently, Amazon.com, Inc. (NASDAQ:AMZN)’s AWS is enjoying a share of 27.2% in the cloud while Microsoft Corporation (NASDAQ:MSFT) was the second with a share of 16.2%. International Business Machines Corp. (NYSE:IBM) is placed third with a share of 11.8%, according to Statista for the first half of the current year in respect of IaaS. Anderson said that the customers appear to be selecting AWS as a safe bet. The research firm predicted recently that AWS provided the computing capacity that is equal to the next 14 key players put together on the market. Anderson said that AWS could generate $7 billion of business in the current year and is on track to achieve nearly $50 billion by the turn of the year 2020. That meant CAGR of 48.17% during the five-year period ending 2020.
Conclusion
Amazon.com, Inc. (NASDAQ:AMZN)’s focus on Iaas and PaaS has positioned itself as a leader. These two are critical for any cloud computing modules. That’s why it is focusing more on it than other tech firms that are offering SaaS. The slackness showed by other firms like Microsoft Corporation (NASDAQ:MSFT) has undoubtedly helped the online retailer to boost its presence. Now, it has a firm footing and with its pricing, it can very well rule the space for long years.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.