Can Amazon Fend Off Cloud Insurgents?



Rivals up in arms against AWS

Amazon (AMZN) has its work cut out for it in the cloud. Microsoft (MSFT), Alphabet’s (GOOGL) Google, Oracle (ORCL), and International Business Machines (IBM) have all been announcing competitive threats against Amazon Web Services (or AWS), raising concerns about the position and prospects of Amazon’s cloud business. Yet cloud operations have become a key profitability driver at Amazon.

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Toughening cloud environment

Amazon’s 4Q16 offered a glimpse into the toughening competition in the cloud computing market as AWS growth slowed. The company reported AWS revenue of $3.5 billion, although that indicated a growth of 47% YoY (year-over-year), the growth slowed from 55% YoY in the prior quarter. Furthermore, the reported revenue missed the consensus estimate that called for cloud revenue of $3.6 billion.

AWS has the most to lose as a cloud leader

Recently during the company’s 2Q17 earnings call, Microsoft’s CEO Satya Nadella offered a glimpse into how the company intends to keep Amazon from its traditional enterprise strongholds.

Microsoft believes that Amazon doesn’t have expertise in the business of selling software and services to corporations. As such, while AWS is a credible competitor in the cloud infrastructure space, Microsoft believes Azure can hold Amazon in software-as-a-service (or SaaS) and other cloud adjacencies where AWS is likely to struggle to gain a meaningful foothold.

Oracle also recently announced plans to open several cloud regions this year, escalating competition for the cloud computing market.

On its part, Google is pushing hard against Amazon, and last year it succeeded in persuading Apple (AAPL) to move a portion of its cloud operations from AWS to Google Cloud.

Being the cloud leader, Amazon has the most to lose if its rivals succeed in their efforts.


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