Increasingly, both businesses and consumers are coming to rely on the power of the cloud. Not just cloud storage, but software accessed over the Internet.
Of course, that cloud-based software requires optimized servers. And when it comes to the businesses providing those servers, Microsoft Corporation (NASDAQ:MSFT), Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) stand out as the dominant players.
The trend towards cloud computing
In recent years, faster broadband speeds have made cloud computing possible. Applications can run on a distant server, and be accessed by the user with just an Internet browser.
This technology is embodied best in Google Inc (NASDAQ:GOOG)’s Chrome operating system. Chromebooks — laptops that run Google Inc (NASDAQ:GOOG)’s Chrome OS — are incapable of running local applications. Instead, the devices are more or less just Internet browsers, relying entirely on cloud-based software.
While most software is still local-only, the trend is clearly towards the cloud. Microsoft Corporation (NASDAQ:MSFT) has created a cloud version of its Office software, while Adobe Systems Incorporated (NASDAQ:ADBE) has stopped offering local-based Creative Suite in favor of the Creative Cloud.
In short, companies want to bring their software to the cloud. That provides a growth opportunity for the major cloud providers.
Microsoft’s Azure solution
Microsoft Corporation (NASDAQ:MSFT)’s public cloud product is called Azure. As a part of its business, it falls under its server and tools division. In Microsoft Corporation (NASDAQ:MSFT)’s last quarterly report, that division accounted for about a quarter of the company’s revenue and profit.
But it could soon be much more. Hedge fund ValueAct has bought up $2 billion worth of Microsoft stock largely on the promise of Azure. Specifically, ValueAct believes that Azure will make Microsoft Corporation (NASDAQ:MSFT) the biggest cloud-computing company in the world.
Using Azure, companies store their cloud software on Microsoft Corporation (NASDAQ:MSFT)’s servers. And according to Microsoft, half of the Fortune 500 uses Azure right now in some capacity.
Microsoft is even pushing Azure with its gaming division. Its upcoming console, the Xbox One, will incorporate Azure to offer limited cloud-based gaming.
Amazon Web Services
Along with selling physical and digital goods, Amazon.com, Inc. (NASDAQ:AMZN) is also a major seller of cloud services. In fact, Amazon.com, Inc. (NASDAQ:AMZN) Web Services (AWS) might be Azure’s biggest competitor. Microsoft and Amazon have been in a price war for months now, with each company progressively attempting to undercut or match the other.
It seems curious that an Internet retailer is such a big player in the cloud. In fact, it might not be for much longer. Analysts at Oppenheimer believe that the company will ultimately opt to spin the division off.
There are some interesting conflicts of interest raised by Amazon.com, Inc. (NASDAQ:AMZN)’s ownership of AWS. Take its relationship with Netflix, Inc. (NASDAQ:NFLX), for example. Netflix, Inc. (NASDAQ:NFLX) uses AWS as the backbone of its website, while at the same time competing head-to-head with Amazon.com, Inc. (NASDAQ:AMZN)’s Prime Instant video.
If AWS is spun off, it could raise significant capital. Oppenheimer believes AWS is currently worth about $20 billion, but will be worth five times that in 2018.
Google Compute Engine
Google Inc (NASDAQ:GOOG)’s business lives in the cloud. Besides its search engine, all of its products are cloud-based. Google Inc (NASDAQ:GOOG) Docs, Gmail, and Google Inc (NASDAQ:GOOG) music are just a few examples of popular Google cloud apps.
But in terms of providing cloud services to other software developers, Google’s platform is known as Compute Engine. Unfortunately for Google, it might have launched the product too late. What’s more, the company isn’t particularly known for its enterprise solutions.
InformationWeek’s Charles Babcock questions Google’s timing, noting that many enterprises are already comfortable with the available products. Business Insider suggests that Google lacks a talented enterprise salesforce.
Google did make one radical step forward in the cloud services war — it offered per-minute pricing plans, not the per-hour industry standard. However, this unique offering was quickly copied by Microsoft.
Google might have launched its product late, but the company is fundamentally more cloud-focused. It’ll be interesting to see if it can leverage its cloud expertise in the war with Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft.
Investing in the cloud computing
When it comes to playing the cloud computing trend, investors might be best served by looking to these three tech giants.
Microsoft’s Azure was enough to get ValueAct to put up $2 billion, while Amazon’s AWS could eventually create an interesting spin-off opportunity. Google is late to the game, but its expertise in the cloud could eventually make it a dominant player.
The article Three Giant Tech Companies Are Fighting to Control the Cloud originally appeared on Fool.com.
Salvatore “Sam” Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com, Google, and Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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