Amazon is a shopping site. Google is all about search. Microsoft makes Windows.
That’s what a lot of people think of when they consider the reputations of three of the biggest tech companies around. But increasingly, the labels are all out of date, as the three companies turn more toward a far more profitable line of business: cloud computing.
The elevation Tuesday of Andy Jassy to Amazon’s future CEO was the latest evidence that the forecast for Big Tech is increasingly cloudy. Jassy spent the past two decades building the company’s cloud business, Amazon Web Services, from scratch. Later this year, he’ll run the whole company.
“It’s a bit of a crowning glory for the cloud,” said Ben Pring, who started writing about cloud computing as an industry analyst in the 1990s, when the idea of putting valuable information on other people’s computer networks struck many potential customers as crazy.
The fluffy name “cloud computing” may obscure what Amazon, Google, Microsoft and many smaller competitors are actually doing: building massive warehouses filled with computer servers, and then renting space on those servers to anybody who needs it, from tech startups to huge corporations or even the military.
Companies or organizations that once needed to invest heavily to build their own computing infrastructure and talent can now more easily and cheaply buy it. By renting space, cloud customers are spared the cost and effort required to build server farms of their own, as well as the work of keeping them secure.
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“The cloud took a long time to overcome the initial skepticism,” Pring said. “‘You’re saying we’ll put our workloads on the internet? We’ll never do that.’ For years and years and years, that was the pushback.”
It’s a much less visible — or fun — business than building websites for consumers, but it’s proved a lucrative operation for Amazon, which made $13.5 billion in cloud profits last year. That was 59 percent of the company’s operating income for the year.
“The biggest events in the world, the World Cup, the Super Bowl, the big reality shows, all use the cloud,” Jassy told The New York Times in 2014, when tech executives still had to sell people on the value of remote computer storage space. Known as the “cloud boss,” he launched AWS in 2006.
In succeeding Bezos as a major tech CEO, Jassy is following a path previously traveled by Satya Nadella, who ran Microsoft’s successful Azure cloud business before his promotion to CEO in 2014. Microsoft’s cloud business revenue hit $16.7 billion over the final three months of 2020, up 34 percent compared to the same period in 2019.
And at Google, the company’s most recent earnings report showed Tuesday that its cloud sales are booming, up 47 percent from a year earlier, or more than double the rate of growth for advertising sales. Google Cloud isn’t yet turning a profit, though.
During the coronavirus pandemic, the cloud industry has benefited from rising demand as more work and customer activity headed online. Revenue jumped last year, too.
The rise of huge cloud businesses has implications beyond the companies’ income statements, though.
Now, offloading data to AWS or its competitors is essential to how the internet operates, so much so that when a journalist for the tech news site Gizmodo tried two years ago to live without Amazon for a week, she couldn’t. She was blocked from visiting many of her favorite websites or using many apps on her phone.
Partly because of Amazon’s cloud dominance, “we found Amazon was too huge to conquer,” wrote the journalist, Kashmir Hill.
Last month, Parler, a social media app that has tried to be a conservative alternative to Twitter, found the same thing after AWS canceled its contract and a judge declined to reinstate it. The service has not fully recovered.
U.S. government agencies rely on cloud services, too, sometimes leading to controversy. In 2019, AWS challenged the awarding of a Pentagon cloud computing contract to rival Microsoft, and litigation could still lead to the contract’s cancellation. AWS alleges that the Trump administration pressured the Pentagon to steer the contract away from Amazon.
Cloud concerns are a top priority even for companies such as Facebook that neither buy nor sell cloud services. In August, Facebook broke ground on what will be its 17th data center built for in-house purposes.
Pring, the former analyst who’s now the director for the Center for the Future of Work at the tech company Cognizant, said there’s plenty more room for the cloud to grow, because only about 25-30 percent of business workloads are in the cloud, with the rest in on-site data centers.
And the term “the cloud” increasingly is just synonymous with the internet.
“The term becomes so ubiquitous as to become meaningless in a way,” Pring said. “It’s like electricity. It doesn’t need any definition. It just is. It’s just there.”
Source: | This article originally belongs to Nbcnews.com
