Cloud Wars – Julian Coleman

Cloud Wars

Julian ColeMan...should’ve learnt how to code.

As the internet started rapidly growing in the early 1990s, one of the key visions sold to users (households and businesses alike) was of a world where anything digital would be accessible from anywhere. It wouldn’t matter if you were away on a holiday, or if one of your employees was working from home, every tool and file needed would be instantly available over the internet. This would all be delivered through a concept called ‘cloud computing’.

For the uninitiated, cloud computing is the delivery of different ‘pay-as-you-go’ services through the Internet, including data storage, servers, databases, networking, and software. Cloud-based storage makes it possible to save huge amounts of data to a remote database and retrieve them on demand.

However, reality would take a while to catch up with that vision. Internet speeds were initially quite slow, and not conducive to adequate user experiences. Hosting all that data also required enormous numbers of physical servers and resources that wouldn’t always be economical even for large corporations.

This has changed significantly over the past ten years, and improvements in speeds and capacity have driven a boom in cloud computing. The barrier to entry has drastically lowered for organisations and individuals to access these services, and this is driving innovation across almost every sector. Where in the past companies would need to invest large amounts of capital upfront for onpremise servers, cloud allows the users to pay on demand for compute and scale up and down the amount of compute they need.

Some of the world’s most powerful companies are currently locked in a protracted war over domination of the cloud computing market. It’s expensive to wage war but when the global cloud computing market size is expected to reach US$1.25 trillion by 2028 the reward is worth the fight. Amazon Web Services (AWS) has dominated cloud computing for the past decade. But Google and Microsoft, giants themselves in the cloud market, are catching up.

To understand the origins of the war over cloud computing, we have to look back to an Amazon leadership retreat at Jeff Bezos’ house in 2003. Amazon’s executive team was asked to identify the core strengths of the company. As the conversation flowed, one thing became abundantly clear: its infrastructure services gave them a huge advantage over the competition. It was at that point, without even fully articulating it, that they started to formulate the idea of what AWS could be, and they began to wonder if they could have additional business providing infrastructure services to software developers. The combination of infrastructure services and developer tools would quickly become a pseudo–operating system for the internet.

On March 14, 2006, Amazon S3 cloud storage launched, followed by EC2 in August 2006. Microsoft’s answer to AWS, Azure, would not be commercially available until 2010. In the

same year, Google Cloud was launched. In a coup for AWS, the CIA would award them a $600 million contract in 2013. The contract value was huge. But potentially more valuable was the signal to the market that if the CIA could trust AWS with their data, anyone could. When a contract for the Pentagon was up for tender in 2018 AWS was a shoo-in. Competitors complained the tender seemed to be designed specifically for AWS. But the market was shocked when the contract went to Azure. It is speculated that Donald Trump’s personal hatred of Jeff Bezos may have led to the White House influencing the decision. Whether true or not, this was a huge win for team Microsoft.

On latest quarter earnings Microsoft has managed to eke out AWS from the top spot with US$19.5 billion in revenue to AWS’s US$14.8 billion. A distant third is Google Cloud with US$4.6 billion. Numbers aside, each of the clouds have their own strengths. AWS is preferred by enterprises for migrating from legacy data centres. Due to its Microsoft heritage, Office 365 suite, broader range of services, and an ambitious road map, Azure is well positioned. Google Cloud has differentiated itself through analytics and machine learning. Leveraging off their maps and search products, Google datasets are incredibly powerful for AI use cases and BigQuery is largely regarded as the best data warehouse in the industry.

The thing about wars is they tend to accelerate technological development. Innovations like radar and even the internet were military projects. Conflict with the Soviet Union drove the space race. The Cloud Wars are no different. By effectively commoditising computation, the major cloud players need to create new products and services to differentiate themselves. Ultimately the beneficiaries are the users. They build integrations, we can assume cynically, to facilitate the acquisition of competitors’ users. The effect is that we are able to access the best-in-class tools and services across the clouds. While it’s unclear which vendor will win the Cloud Wars, we as consumers have already won.