How Cloud Computing Became a Big Tech Battleground

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How Cloud Computing Became a Big Tech Battleground


IBM, Google, Microsoft, all are making big bets on cloud computing. That's for good reason. Research firm Gartner forecasts cloud computing revenues to exceed $260 billion dollars in 2020. For years Amazon's AWS led the market. But, that lead is starting to slip as other firms make moves to bolster their cloud computing offerings. In October, Microsoft surprised onlookers when it won the U.S. military's JEDI cloud contract. It could be worth $10 billion dollars over 10 years. Some in Washington expect Amazon to appeal this decision. In July, IBM spent $34 billion dollars to acquire RedHat and boost it's cloud business. So, why are tech firms going to battle for cloud services? To understand, you've got to know the basics. - Well, and like any market that grows it's strong because it offers a value proposition to people that they find attractive, and so they shift their spending. - Cloud computing at it's core, is about changing the way businesses manage data.

Everything done online; shopping, video, texts, it all takes data. The data is processed in behind the scenes computers called servers. Managing that equipment takes time, energy, and money. When a business moves to the cloud it's really just outsourcing. In other words, tech firms like Amazon handle some IT services so businesses can focus on what they do best. Outsourcing IT can generate savings. For example, Bank of America adopted hybrid cloud computing and that reduced annual costs by $2.1 billion dollars. Start-ups who uses a cloud provider won't have to spend as much on a custom data center. They can use resources from a third party. In-house IT has to maintain enough server space to account for peak demand. That can mean that your company has a bigger data center than it needs on a consistent basis. Instead, cloud computing lets companies pool their resources. The companies use as many servers as they need and only pay for what they consume. Companies that use the cloud can benefit from the remote management of data in places like Ashburn, Virginia. Amazon, IBM, and others host some of their data centers in less populated areas like this.

Both energy and land can be cheaper here than say, a city center. That's why you see groups like Facebook and the NSA opening data centers in small towns in Utah. There's potential for lower costs, the views aren't bad, either. Cloud computing is tougher for some businesses than others. In the years after the launch of AWS, businesses like Netflix, Lyft, and Slack launched products with intense IT demands. They were a natural fit for cloud computing. Some companies who are moving to the cloud today are bigger, and are in more regulated industries like health and finance. They're companies like J.P. Morgan which operates under strict standards from regulators like FINRA. In 2017, Dana Deasy was the chief information officer. At the time, he moved portions of the financial giant's data to the cloud. His next task will be even more formidable, do the same for the Defense Department. - So, I've mentioned we have a need for an enterprise cloud, so we have massive compute capability where we can start to store our data in a more common way and make it accessible. - The multi-billion Joint Enterprise Defense initiative is supposed to centralize the military's technology and reap gains in innovation.

Getting there will mean untangling years of disparate IT systems. That will take time, money, and expertise, which is why Microsoft's potential win is so significant. Amazon is no longer the only big name in cloud computing. Microsoft's Azure Cloud service was announced three years after Amazon AWS took an early lead. More than a decade has passed and AWS still dwarfs Azure in revenues. But, more deals are on the horizon. - The cloud markets are still relatively small. So, their growth rate naturally is going to be higher. And we do see that growth rate coming down slightly over time as the cloud markets get bigger. But, the strong growth rates are still driven by the fact that people prefer cloud models over the traditional models for a lot of their work loads. - Which is why you see the largest firms in tech betting big on the cloud. Billions of dollars hang in the balance.

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