Why are there only 3 Cloud Providers?
AWS (Amazon), Azure (Microsoft), and Google Cloud (Google). Phew !! These three names consistently appear when discussing public cloud computing providers. It’s like the others don’t exist.
A few years ago, I attended a virtual fintech conference during the pandemic. That was a time when all the attendees were emojis on a digital platform. Masked by an emoji and my new-found fearlessness, I stole the opportunity to ask the keynote speaker a bold question.
“So, tell me, why don’t we see any huge public cloud players in other countries like India or China?”
The speaker smiled and then gave me an extensive reply. Here are some of his key points.
Size Does Matter
When you read their documentation, the first thing that hits you about these three cloud players (AWS, Azure & Google cloud) is their massive global reach.
Here is a chart showing the number of regions and areas they operate in across the globe.
Each of these regions is further broken into zones, with each zone having at least a couple of data centers. Do the math, and you can see the scale I am talking about.
We’re talking about data centers. Setting up a data center would involve components such as real estate, buildings, power supply, manpower, and connectivity, among others. Each of them has its own cost. The total cost to set up a fully functional data center could run into millions of dollars.
If you look at the number of regions and roll them up to the number of countries, the figure we are talking about here is in the billions of dollars.
Does it not surprise you, then, that Amazon, Microsoft, and Google all have other very successful revenue-generating businesses that have been funding their cloud expansion all along? Amazon has its retail wing, Microsoft has the desktop and Office, and Google has its search.
Among these three cloud players, Amazon has been reporting cloud revenue since 2015, Google since 2020, and Microsoft indirectly in the commercial cloud category.
So, one extremely high barrier to entry is cost.
The Economic Factor
Whenever any of these 3 players set up shop (at least a zone with a few data centers) in a new country, it says a lot about the country.
It says so much about its stability, both economic and political.
- Core Industries — the establishment of data centers for cloud computing involves establishing power plants (conventional or non-conventional) as well as gaining access to resources such as cement, steel, etc. This, in turn, gives a positive leg up to the local economy.
- Downstream Industries — then there’s multiple industries that would spring up around this to support people, such as restaurants, hotels, entertainment centers, etc., which are also big job creators.
There are examples of countless countries across the world whose economies have grown in leaps and bounds due to the investments of these cloud players.
Germany, for example, has been a focal point for Amazon’s expansion into Europe. Furthermore, the sovereign cloud project that Amazon has acquired will be headquartered in Germany. The infrastructure cost alone could be a windfall for Germany. Estimates for AWS’s continuous investment in Germany amount to about $10 billion.
Singapore is another beneficiary of these cloud providers’ largesse. AWS has invested $9 billion in the thriving island state’s cloud infrastructure.
Google has long eyed India’s 1.2 billion market and has been working with the government for quite a while now on various initiatives. It has collaborated with the Government of India on its ONDC platform, which was meant to democratize e-commerce for both buyers and sellers.
As a result, it should come as no surprise that the heads of these three cloud companies are frequent guests at the World Economic Forum in Davos.
Customer Base
While there may be a ton of smaller cloud companies out there that serve a smaller local market, having an existing loyal customer base is almost a necessity to be able to scale out geographically on the cloud.
Building a massive business needs an equally large customer base to support continuous profitability. Acquiring customers is never easy.
Which is why all these 3 players tapped into their existing customer base to grow their cloud businesses: -
- Amazon — AWS was the first to the cloud, so it had the benefit of mapping out the terrain. Customers got to see its services first. It still has a ton of loyal customers, some dating back to day 1.
- Microsoft—Azure benefited from its enterprise base, which AWS had to build from scratch. The Office 360 product on the cloud has been a hit with existing customers, a lot of whom have built their careers honing Excel macros, polishing PowerPoints, and checking Outlook.
- Google — Google Cloud’s prowess in the search engine arena made it a natural play on the cloud. Netizens have been using Gmail, Google Drive, and quite a few more of their free products since their arrival at the scene. Although it was a distant third, Google did try to onboard a ton of users into their environment. The fact that they took a lot of time to come in a close third was itself a testament to the herculean effort needed to remain in the race.
Clearly, an existing customer base could help alleviate some of the tension in their financial statements.
Succeeding in the global public cloud market is tough enough, let alone entering it. This is why numerous governments worldwide, including those with substantial financial resources, opt to establish agreements with these top 3 companies to avoid any unnecessary problems in the future.
The moat for these 3 cloud providers keeps gets bigger all the time.
