Microsoft and Oracle team up to take on Amazon to dominate cloud business

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New Delhi | Published: June 16, 2019 8:09:50 PM

The move comes after the acquisition of data visualization company Tableau by Salesforce and data analytics firm Looker by Google Cloud which points out that the investment in cloud services and big data has become the next big things for software companies.

Amazon cloud, Microsoft Azure, Amazon Web Services, Microsoft cloud, Oracle cloud, Amazon, AMZN, Microsoft, MSFT, cloud subscription model, ORCL, IBM, Microsoft, Microsoft Azure,(Reuters)

With Amazon Web Services dominating the burgeoning cloud computing business, industry rivals have come together in order to wrestle the crown from the former.

Former rivals in the cloud business Microsoft and Oracle, made an announcement last week that they would be linking their cloud computing services. Oracle Cloud and Microsoft Azure will be linked over a high-speed direct network, letting clients upload and store their data on both clouds and run business operations software on any of the cloud best supporting them.

Amazon Web Services currently dominates the global cloud business and controls over 30 percent of the market, as per Synergy Research Group. Microsoft Azure controlling the second-largest share of the market which stands at around 15 percent while IBM Cloud and Google Cloud making up the four leading companies. Smaller cloud business providers such as Oracle have shown growth at a slower pace so far as the top four grow stronger in their hold on the market share.

Microsoft and Oracle state that their new partnership will improve the experience for users and also benefit organizations so that they could use multiple cloud platforms simultaneously. The move could strengthen the position of the two companies to take on Amazon Web Services for big businesses as well as government clients.

“With Oracle’s enterprise expertise, this alliance is a natural choice for us as we help our joint customers accelerate the migration of enterprise applications and databases to the public cloud,” Scott Guthrie, executive vice president of Microsoft’s Cloud and AI division, was quoted as saying in a statement.

The move comes after the acquisition of data visualization company Tableau by Salesforce and data analytics firm Looker by Google Cloud which points out that the investment in cloud services and big data has become the next big things for software companies.

The battle to dominate cloud business – All for profit
There is a reason why cloud brings several advantages to companies, in particular letting businesses to outsource hosting, security and storage costs which can be quite expensive.

And for dominant players leaders like Amazon (AMZN) and Microsoft (MSFT), the cloud’s subscription model has become very profitable.

Now, let us look at the numbers.

Microsoft’s commercial cloud services, including Azure and Microsoft Office 365 Commercial and other commercial cloud properties, earned $9.6 billion in revenue in the first quarter of 2019, up by 41 percent from the same period in 2018.

During the same time, Amazon Web Services earned $7.7 billion in sales, which is a 41 percent increase from the previous year. AWS generated 13 percent of the company’s total sales, however the high margins for the business meant it earned an even bigger share of Amazon’s total operating income.

Furthermore, the business for cloud services continues to grow large as well. Synergy has reported that the market generated $70 billion in sales in 2018, with a growth rate of nearly 50 percent.

These profits have led to an intense rivalry among cloud providers. Some like Oracle highlights their fact that they process large quantities of data on their platform while others market the abilities of their exclusive software which can be used on their cloud platforms as well. Amazon has been aided by the fact that it was the first of the firsts in the cloud computing business.

This has led to a war between the cloud service providers for lucrative government clients.

Microsoft Azure and Amazon Web Services are locked in a battle for a $10 billion contract for cloud computing services to the US Defense Department. Oracle (ORCL) and IBM (IBM) have challenged Amazon’s bid for the contract, with the former filing a federal lawsuit earlier in June 2019 accusing Amazon of conflict of interest, CNN Business reports.

Why Microsoft and Oracle have joined forces
Microsoft and Oracle have said that their partnership will provide a “best-of-both-clouds experience.”

The move will let clients to move their data from their on-site servers to both Oracle clouds and Microsoft Azure simultaneously without having to restructure anything for compatibility, thereby preserving the big investments joint customers have already made.

This agreement also includes some other advantages for big business clients such as a single sign-on for services from both organizations, and tech support from either of them.

Industry experts are also saying that while the agreement would not particularly help Microsoft, however, it help Microsoft grow Azure Premium Services and also aid Oracle, especially, in improving its standing against Amazon, CNN Business said in a report.

It is also to be noted that Oracle has historically shown resistance to partnerships and now may have finally realized the importance of an ally in the fight against key market players in the industry.

The deal will also provide a good source for selling Azure Premium Services to the Oracle customer base.

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