Cloud computing is a fast-growing business at both Redmond-based Microsoft and Seattle-based Amazon, where it balances the thinner profit margins of the retail side of the company. Cloud competitors including Google and IBM also have major engineering offices in the region.
In the quarter ended Dec. 31, Microsoft reported sales of $11.9 billion in the business segment that includes its Azure cloud computing business, lumped in with its traditional server software and business consulting services. The company said Azure sales increased 62% from a year earlier, though it doesn’t disclose the revenue figure. Amazon Web Services (AWS) reported revenue of nearly $10 billion in the same period, up 34%.
Cloud services companies allow customers to rent remote computing power, scaling up and down usage, and associated costs, as needed. The cloud has steadily replaced the old model of organizations building and owning their own servers and data centers, which takes time, requires large up-front capital outlays as well as ongoing maintenance costs, and leaves them with excess computing capacity that goes unused except during brief periods of peak demand.
A business running on the cloud that experiences a spike in customer traffic to its website can immediately call on servers in a global network of Amazon or Microsoft data centers to handle the load. When the traffic subsides, they can turn off those services. Likewise, if a company needs to perform a complex analysis or test a machine learning algorithm, it can rent nearly limitless computing power from a cloud provider for a few hours, rather than incurring the cost of owning it.
In practice, businesses tend to scale up their cloud usage but don’t often scale it back down, said Quinn, whose firm helps companies manage their AWS bills and has customers that spend in aggregate about $1 billion a year on Amazon’s cloud.