The cloud wars are becoming a duopoly with Microsoft operating their Azure division and Amazon offering the public their Amazon Web Services (AWS).
Amazon has first leader advantages and works in the fastest growing part of the cloud where they focus more on start ups. Amazon advertises heavily to make sure people know it’s a lower cost provider. The AWS business segment has been growing at an annual rate of 43-55% for the last three years and grew 41% last quarter alone. This is Amazon’s largest margin business.
Companies leaders use strategies they learned while building out Amazon Marketplace, its giant retail business. Amazon is almost twice the sizes of Microsoft thus turning its market-leading advantage into economies of scale (unless you include the office 365 and other software that are becoming more involved in the cloud space). Some of the newest customers of AWS are Volkswagen, Ford and Lyft.
Microsoft Azure works better with personal computers and the company does not compete online against most of their clients, which has helped them to land big retail giants like Albertsons, Krogers, Walgreens and Walmart. Considered a very reliable brand, Microsoft is used being used by 95% of Fortune 500 businesses.
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The other obvious advantage is that Microsoft cloud is integrated with Office 365 and Dynamics. With more office related products and software, Microsoft has a natural advantage in the investment banking and traditional service-related industries.
Cloud computing is the on demand availability of computer system resources, especially data storage and computing power, without direct active management by the user. The term is generally used to describe data centers available to many users over the Internet. Large clouds, predominant today, often have functions distributed over multiple locations from central servers. (Source: Wikipedia)
Both Amazon and Microsoft claimed their cloud commercial business grew 41% in the last quarter, and both companies are currently locked in a head-to-head, in a winner-take-all deal for a $10 billion Pentagon order.
Amazon is competing against open source software providers. Microsoft is working towards it. Historically, low-cost open source companies have won the most markets, but this one is split down the middle, with AWS being low-cost but proprietary.
Over time this reminds us of Coke vs. Pepsi where both companies won market share but third place and beyond shrank, such as 7-up or Orange Crush–brands that are harder to find today. If that end up being the model here, it’s bad news for Google, IBM, Oracle and Alibaba.