Why Amazon, Google, and Microsoft Are Poised to Keep Dominating Cloud Computing
Three Big Clouds
The three companies that dominate cloud computing are in growth mode. As the pandemic led to more off-site work, cloud computing became essential for most businesses. This trend helped Amazon (AMZN), Alphabet’s Google (GOOGL), and Microsoft (MSFT) expand their cloud divisions even further.
Synergy Research Group notes the three companies accounted for 65% of the world’s cloud-service spending during the year’s first quarter. That’s up from 52% four years ago and amounts to a combined $53 billion. But cloud computing’s “big three” aren’t resting on past accomplishments. Industry observers say the group’s sales have grown over 30% on an annualized basis in recent quarters, while smaller competitors have seen their market share shrink.
While the pandemic put an emphasis on cloud-computing, Amazon, Google, and Microsoft were well-positioned to pounce. The business model demands major investments in servers and the facilities where they are located. Moreover, as server farms grow into larger networks, operating costs decrease on average due to economies of scale.
The “big three” had a head start, and now smaller firms face new challenges. As inflation soars and the Fed hikes rates, raising funds for tech ventures has become more challenging. What’s more, Amazon, Google, and Microsoft have developed their own software, technology, and chips, which also helps reduce costs.
Some companies focused on cloud computing are working alongside the sector’s dominant players rather than competing with them directly. Sabre Corp is one example. The travel software company is running more of its operations through Google’s cloud, which has helped it streamline operations.
Other cloud computing firms are in direct competition with Google, such as Snowflake Inc. Its sales have doubled during each of the past two fiscal years but growth is forecast at 66% this year. Analysts argue this is indicative of Google’s ability to grow at scale given current market conditions, similar to Microsoft and Amazon. Cloud’s big three are well established — other companies may have to decide between partnering up, or waging direct competition.
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