Google hopes it will use its technological prowess to win cloud customers Credit: Bloomberg
Google is known in almost every country as the world’s dominant search engine, Amazon as the world’s biggest online retailer, and Microsoft as the computer software powerhouse behind Windows.
But the three companies are also locked in a battle to define the next revolution in computing, a gold rush that could become even more lucrative than the hundred-billion dollar operations they run today: the cloud.
Cloud computing lets companies or people essentially rent on-demand processing power, storage and software over the internet. Instead of buying expensive computer servers, memory and programs, companies can now hire them, tapping into the vast enormous data centres run by the likes of Google, Amazon and Microsoft. The cloud is the difference between being able to listen only to the music you have stored on your computer and finding any song on an on-demand internet service like Spotify, and the difference between losing a crucial document and having it accessible from any computer with an online file locker.
However, for many companies, it is more than that. While businesses would traditionally store their data and run complex processes such as programs that analyse customer shopping habits on an expensive computer server in the office that required hiring dedicated engineers, cloud computing means they can use somebody else’s hardware thousands of miles away, doing away with upfront costs and letting them add capacity whenever they need it.
The internet video service Netflix, for example, runs almost entirely on Amazon’s cloud platform. During peak hours, Netflix can take up more than a third of all the internet traffic in America, a level of demand it wouldn’t be able to keep up with by building its own servers. The messaging app Snapchat, launched just five years ago, now shows its users 7bn videos a day, a strain on computing resources that would have meant constant service outages before cloud computing; the company runs on Google’s cloud.
Huge data centres host data and software in the cloud Credit: Rex Features
AWS made $7.9bn (£5.6bn) in revenue last year and is expected to grow by as much as 50pc this year, making it the fastest-growing enterprise software company of all time. When Amazon first revealed the division’s financials last year, they were well beyond what any investors had expected and the company’s share price soared. It could well become more profitable than Amazon’s colossal retail operation this year. “Everyone else is playing catch up against Amazon,” says David Richards, the chief executive of WANDisco, a British company that helps businesses move complicated data to the cloud. “They have a seven to 10 year lead on some of their rivals.”
But if Amazon has built up a sizeable headstart, Microsoft and Google are both fighting back hard. Two years ago, Microsoft appointed Satya Nadella, the head of its cloud business, as chief executive (the company’s cloud competitors were apparently praying that rumours ex-Ford boss Alan Mulally, who might have taken Microsoft in a very different direction, would get the job were true). Microsoft has a long history of selling software to corporate IT departments, giving it a springboard to offer its Azure cloud service, and the division grew by 140pc last year.
Google, meanwhile, is seen as a distant third. In its earlier days, the company essentially invented cloud computing by building the huge data centres required to run its search engine and letting its developers build programs on top of it, resulting in programs including Gmail and Google Maps. It has tremendous expertise in both computing infrastructure and security – the top priority for most companies using the cloud. But Google arrived late to offering other companies cloud services, and it doesn’t have the same history of selling products to enterprises, having focused on consumer technology. Google does not reveal its cloud revenues, but they were estimated to be around $500m last year, less than 10pc of Amazon’s.
Alphabet chairman Eric Schmidt at this week's Google Next conference Credit: Google
But that is beginning to change and Google is going on the offensive, betting heavily on its ability to catch up to Microsoft and Amazon. In November, it hired Diane Greene, a legend in Silicon Valley who founded the software company VMware, to run its enterprise operation, in what was seen as a major statement of intent. In recent weeks, Google has signed up Spotify and Apple as customers, despite being rivals to both, as well as corporations such as Disney.
The company has been on a publicity offensive. Even in the tech-centric San Francisco, where the billboards flog apps and website design software, rather than Coca-Cola or the latest blockbuster, the adverts for Google Cloud Platform are unmissable. And this week it held a summit on the edge of the San Francisco bay, bringing out Google’s biggest guns including its chief executive Sundar Pichai and Eric Schmidt, the chairman of parent company Alphabet, as a statement of intent. Google unveiled a series of new features for its cloud service, including the ability for cloud users to access its expert artificial intelligence technology, letting companies use the same “machine learning” tools that Google uses to understand images and translate text.
“We believe that in the future, almost everything will be done in the cloud, because it’s a better way of doing business,” Pichai said. “We are at the beginning of what’s possible; businesses are just starting to adopt the concept and we are set up with the right people at the right time. We’re seeing a real acceleration in customers choosing us.”
Diane Greene has been hired to run Google's enterprise business Credit: Google
Analysts were largely impressed, if cautious about the company’s ability to claw back the lead its rivals have. We still view Google as a very distant third place player behind AWS and [Microsoft] Azure, but we see Google drawing on its scale and automation advantages,” said RBC’s Mark Mahaney.
Google itself is yet more ambitious: its cloud division is the fastest-growing part of the company, and some executives believe it could one day be bigger than the huge internet advertising operation that currently pays the bills.
“IT is a trillion-dollar industry and everybody is going to run in the cloud, but it’s [currently] well under 10pc” says Greene. She adds that many companies have got over fears about putting confidential data on somebody else’s servers, claiming that the cloud is in fact more secure: “Google's been in the crosshairs of every major hacker from the beginning we really hardened our systems more than anyone else.”
The cloud has begun a revolution in computing, and heightened the rivalries between the already ultra-competitive technology giants on America’s west coast. But, says Greene, “this is really early”.