• Define the industry – Cloud computing

The market for cloud computing worldwide was estimated to be worth 368 billion USD in 2021.From 2022 to 2030, it is projected to increase at a 15% annual rate. As more companies and employees use various online computer systems to manage their businesses and cut costs during the COVID-19 epidemic, the necessity for cloud computing has increased (Techradar, 2022). Cloud computing is simply the word for online provision of computing services like servers and storage (“the cloud”). In the past, companies had to spend money on hardware and software purchases in order to run their data centers, servers, and apps. Companies can access, for instance, mission-critical programs through the cloud using cloud computing without spending money on data servers, electricity for power, and cooling (Techradar, 2022).

•  Introduce the actors

With numerous players, the cloud computing market might be perceived as quite complex.
Google, Amazon, and Microsoft, however, are the three leading competitors.
The Gartner Magic Quadrant, which assesses vendors and their capabilities, includes these three as well.

With AWS, Amazon will be the market leader in 2020-, holding more than 41% of the market, more than twice as much as Microsoft. In 2020, it brought in almost 45 billion dollars (Statista, 2022).
Businesses can build their own IT infrastructure using the large range of services that AWS provides and their cloud ecosystem. Everything is available, including applications for computation, storage, analytics, developer tools, and security.In comparison to other actors, AWS has been on the market the longest.
They are regarded as experienced providers with a wide range of options.

In the digital era, Google has developed a strong brand recognition and holds a prominent position in the search engine and advertising sectors.Around 30,000 paying users are thought to be using Google’s cloud computing services. Their approach is based on offering open-source innovation with a developer-centric approach (Techradar, 2022).Globally used by developers are their compute services like Kubernetes and TensorFlow.
Statistics from 2020 suggest that Google Cloud revenue was 19 billion US dollars, or 7.5 percent of Google’s overall revenues, even though they don’t provide real revenue figures (Statista, 2022).

Windows, Microsoft‘s operating system, is its most well-known product.It has shifted its attention in recent years to the cloud computing sector and introduced Microsoft Azure, which provides end-to-end cloud service solutions.Instead of concentrating on selling licenses for their operating system, its strategy now centers on a “cloud first” approach.In 2020, Microsoft’s cloud revenue of $19.1 billion represented approximately 39% of total sales (Statista, 2022).

• Why the actors are competitors

Five vendors control 80% of the global market for cloud computing, according to research firm Gartner. As mentioned above, the cloud computing industry created a new kind of sales income for the listed corporations.The ability of enterprises to regulate and use price as a competitive market and the capacity of firms to generate above-average profits over the long term are two factors that Keat and Young (2014) claim define competition.These three players are engaged in a strong pricing competition in the cloud computing sector.Actors provide cheaper pricing to attract or retain clients in an effort to bind them to their service ecosystem. AWS has the benefit of a sizable market share and has had the advantage of being around far longer than the other players due to the fact that both Google and Microsoft entered the cloud computing business later than AWS.

Competition analysis

• An overall picture of the companies in the industry

Since a small number of very large companies own the majority of the market share, the cloud computing sector can be viewed as an oligopoly.AWS dominated this market with a share of more than 40%. We have eleven vendors with a combined market share of 18% after the big three. The oligopoly market, according to Keat and Young (2014), is characterized by a small number of major enterprises and frequently standardized products.Their scale or market domination gives them market power.Additionally, when there are few sellers on the market, each seller constantly analyzes the pricing of the other and keeps an eye out for pricing patterns. Furthermore, price leaders usually solidify their position as the price leader in an oligopoly market by being the first to disclose any price increases (Keat & Young, 2014).

• Potential competition analysis entrant

We can utilize the Porter Five Forces analysis to examine the prospective competition evaluation for new entrants.The top three giants have increased their relative market strength among consumers in the current environment. Customers sometimes find it difficult to merge several hybrid models or switch between cloud computing providers. The competitive market environment is viewed as an oligopoly, meaning there is some market appeal in terms of developing competing solutions, but in this environment the lock-in effect of, for example, AWS is significant, making it challenging to win over clients.For new entrants, it would necessitate significant capital expenditures, infrastructure (servers and storage) spending, and a personnel with a high level of education.Therefore, it is quite challenging for new competitors to enter this industry and compete with the main three titans.

• Current competition analysis incumbent

The battle to dethrone AWS is becoming more fierce among the top three titans described above.The industry generates enormous revenues, and the various providers compete with one another for business.
Each of the three actors makes an effort to regularly upgrade its support, software, and infrastructure.
Once a buyer makes a cloud computing investment, it is difficult to withdraw their money. To ensure that customers are using their ecosystem services, all three players attempt to exploit lock-in effects.
Since it has been on the market for a longer time, Amazon Web Services (AWS) has more developed products.
They also perform a wide range of huge organization support tasks, which the other two players do not.Three categories—Infrastructure as a service (Iaas), Platform as a service (Paas), and Software as a service (Saas)—have arisen as a result of the three industry titans’ shifting product lineups (Techradar, 2022).

Customers can buy products from all three product categories from the incumbents.The company must purchase servers, hardware, and storage while using Infrastructure as a Service. In this area, Amazon AWS is the market leader due to the size of its global network.As a result, they can somehow reduce server costs through economies of scale (Techradar, 2022).More security measures will be necessary in the future to protect data from cyber-security risks, and all three actors are attempting to develop new services in this area.

References:

Keat & Young  Managerial Economics (2014): Economic Tools for Todays Decision Makers, 4th

Microsoft Azure (2022). What Is Cloud Computing? A Beginner’s Guide | Microsoft Azure. [online] azure.microsoft.com. Available at: https://azure.microsoft.com/en-us/overview/what-is-cloud-computing/#benefits.

Techradar. (2022). 2021 saw a major cloud spending surge. [online] TechRadar. Available at: https://www.techradar.com/news/2021-saw-a-major-cloud-spending-surge [Accessed 1 May 2022].

Statista. (n.d.). Google cloud revenue by quarter 2021. [online] Available at: https://www.statista.com/statistics/1254388/google-cloud-revenue-by-quarter/.