eResearch | In August 2019, the United States Military’s Pentagon is expected to announce the winner of a US$10 billion contract to develop and support the cloud infrastructure behind an artificial intelligence (AI) driven computing network, called the Joint Enterprise Defense Infrastructure (JEDI). The contract will last a maximum of 10 years and will be awarded to a single Infrastructure as a Service (IaaS) vendor.
The decision has been narrowed down to either Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ) or Microsoft Corporation (NASDAQ: MSFT; LSE: 0QYP; DB: MSF), with International Business Machines Corporation (NYSE: IBM; LSE: IBM; DB:IBM) and Oracle Corporation (NYSE: ORCL; LSE:0R1Z; DB: ORC) out of the competition. Amazon was considered an early front-runner to win the contract as they had credibility and experience from an existing high-security cloud contract with the Central Intelligence Agency (CIA). Oracle filed a lawsuit complaining about the single vendor contract, and stated that the contract was written to favour Amazon, but the case was dismissed by the U.S. Federal Court earlier this month.
The winning cloud service provider will be responsible for hosting and distributing mission critical data to classified individuals worldwide through JEDI. This network will help the U.S. Military in leveraging data and AI to make critical and time sensitive decisions, such as analyzing data collected from surveillance aircrafts to predict when equipment needs maintenance.
IaaS is becoming a necessity for all businesses of all sizes to grow and scale, as businesses need infrastructure and data servers to run their online operations, apply data analytics, and secure network connectivity. Large technology companies with capabilities to build vast networks of physical servers can provide these data management services on demand through the internet.
The first to service this need was Amazon Web Services (AWS), an on-demand cloud computing platform developed by Amazon in 2006. AWS grew in popularity as it supported 150,000 developers at its launch, and created a gold standard for a simple pay-as-you-go data service that assured developers a secure and efficient data storage and management service. In addition, AWS Auto Scaling provides support as it monitors clients’ applications to automatically scale capacities as the applications grow, which maintains optimal performance at low costs. AWS reported a 46% increase in revenue to US$25.6 billion in 2018 compared to US$17.4 billion in 2017. In 2018, AWS accounted for 58% of Amazon’s total consolidated operating income, commending a high operating margin of over 25%.
Microsoft started competing within this industry in 2010 through their own cloud computing service called Microsoft Azure, which leveraged Microsoft’s ecosystem of services and products (Office, SharePoint, Windows/SQL server, etc.). Microsoft grew their cloud business rapidly as it seamlessly integrated the platform with its preexisting products and services that clients already used in their operations. In 2018, Microsoft’s Azure beat out Amazon’s AWS for top sales in the cloud business with US$32.2 billion reported revenue.
According to Gartner, the cloud infrastructure market is expected to grow to US$680 billion in 2023 compared to US$292 billion in 2017 (12% CAGR), stimulated by the need for scaled growth in data security and management. The retail and consumer goods vertical is the main driver of revenue for cloud computing as it needs efficiency and scale for data storage, data backup, and data security. North America is currently the leading adopter of cloud computing but in the near future, Asia Pacific demand is expected to outpace North American..
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Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ)
Headquartered in Washington, United States, Amazon is a multinational technology company with diversified operations in e-commerce, cloud computing, digital streaming, and artificial intelligence. Its cloud computing arm, Amazon Web Services, currently accounts for the highest percentage of cloud infrastructure servicing companies. Amazon currently trades for US$2,010.10 per share with a market capitalization of US$990 billion.
Microsoft Corporation (NASDAQ: MSFT; LSE: 0QYP; DB: MSF)
Headquartered in Washington, United States, Microsoft is a multinational technology company that focuses on manufacturing and licensing computer software, cloud computing, and consumer electronics. It is best known for its software products Microsoft Windows and Microsoft Office Suite. Microsoft currently trades at US$136.98 with a market capitalization of US$1.05 trillion.
International Business Machines Corporation (NYSE: IBM; LSE: IBM; DB:IBM)
Headquartered in New York, United States, IBM is a multinational information technology company that focuses on the production and distribution of computer products and services. It is one of the 30 companies included in the Dow Jones Industrial Average and is one of the world’s largest employers. IBM currently trades at US$143.48 with a market capitalization of US$127 billion.
Oracle Corporation (NYSE: ORCL; LSE:0R1Z; DB: ORC)
Headquartered in California, United States, Oracle Is an enterprise software and cloud computing company that is best known for its enterprise resource planning, customer relationship management, and supply chain management software. Oracle currently trades at US$58.78 per share with a market capitalization of US$196 billion.
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