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Cloud Computing

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Cloud is about how you do computing, not where you do computing.
—Paul Maritz, Former CEO of VMware1

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Businesses, no matter the size, have been incorporating cloud computing since its inception. And many of
these companies are experiencing the benefits that cloud computing offers, like reduced costs and improved
scalability.2 When asked to explain the technology, the CEO of Salesforce.com went so far to say, “Simply put,
cloud computing is a better way to run your business.”3 But even though this technology has great potential, it
may not be the perfect solution for every business.4

In fact, many companies have migrated to the cloud only to encounter the very hardships and costs that
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they were hoping to mitigate. Nitin Bhadauria, cofounder of a cloud consulting company, said, “Cloud is not a
magic bullet that will automatically solve all your technology problems.”5 So how can business leaders better
assess how and when to integrate cloud services within their companies? Thorough research and examining the
range of cloud options in depth is often the proposed method to address this question.6 By exploring the details
of cloud computing and comparing the advantages and disadvantages, managers can better understand how to
implement cloud computing most efficiently within their individual businesses.
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What Is Cloud Computing?

Historically, information technology (IT) departments had no other options but to buy and configure their
own hardware on premise. Not only did these departments have to build out the physical infrastructure for
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1 “How Has Cloud Computing Changed the Enterprise Business Landscape?,” Pratham Software, 2019, https://www.thepsi.com/how-has-cloud-

computing-changed-the-enterprise-business-landscape/ (accessed Nov. 30, 2022).

2 Carl Mazzanti, “Closing Entry: Cloud Computing Offers Promises—and Pitfalls,” NJBiz, September 12, 2022, https://njbiz.com/closing-entry-

cloud-computing-offers-promises-and-pitfalls/ (accessed Nov. 30, 2022).

3 Scott Duke Harris, “2009 Q&A: Marc Benioff, CEO of Salesforce.com,” Mercury News, October 23, 2009,
https://www.mercurynews.com/2009/10/23/2009-qa-marc-benioff-ceo-of-salesforce-com/ (accessed Nov. 28, 2022).
4 “Reasons to Move, and Reasons Not to Move, to the Public Cloud,” TL Consulting Group, https://tlconsulting.com.au/reasons-to-move-and-

reasons-not-to-move-to-the-public-cloud/ (accessed Nov. 30, 2022).

5 David Prosser, “Realising the Potential of Cloud Computing with Lucidity,” Forbes, September 8, 2022,
https://www.forbes.com/sites/davidprosser/2022/09/08/realising-the-potential-of-cloud-computing-with-lucidity/?sh=5bc3d5353bf2 (accessed
Nov. 30, 2022).
6 https://tlconsulting.com.au/reasons-to-move-and-reasons-not-to-move-to-the-public-cloud/.
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This technical note was prepared by Alyssa Coughenour (MBA ’21) and Jane Webb (MBA ’21), under the guidance of Timothy M. Laseter, Professor of
Practice with assistance from Benjamin Boatright, Case Researcher. Revised in part by Koushyar Shaloudegi, Case Researcher. Copyright  2023 by the
University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an email to
[email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by
any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. This publication is protected by copyright and
may not be uploaded in whole or part to any AI, large language model, or similar system, or to any related training database. Our goal is to publish materials of the highest
quality, so please submit any errata to [email protected].

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[email protected] or 617.783.7860
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their companies, but they also had to rely on their own staff members to construct and administer digital
resources like applications, software, and other development tools used to support the business. Cloud
computing has since emerged as an alternative for IT departments by providing a range of services that allow
these groups to shift some of their responsibilities to a selected provider.7

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Cloud computing can be broadly defined as a paid service that connects users to a multitude of computing
resources through the internet.8 Depending on the service model a user purchases from a cloud provider,
resources could include hardware, software, engineering tools, or even developed applications.9 The National
Institute of Standards and Technology (NIST) outlines three service models that encompass the largest areas
of cloud computing: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service
(SaaS).10

IaaS manages the bulk of infrastructure-related responsibilities by providing computing, data storage, and

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networking capabilities without the user having to purchase and maintain the underlying servers and data
centers that support these capabilities. With IaaS, the user manages only the software.11 Along with
infrastructure resources, PaaS also manages the operating systems and development tools that make it easier
for users to construct and maintain applications.12 Finally, SaaS bundles the hardware and software
requirements together into a built and managed application ready to be used in a business.13

On a nontechnical level, on-premise infrastructure, IaaS, PaaS, and SaaS can be compared to vehicle
transportation. On-premise infrastructure is like owning a car and housing it in your personal garage: the car
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owner picks out the vehicle they want from a handful of trusted manufacturers but then is responsible for
storing and maintaining the car over its life. It also means that the owner can take the car anywhere they want
to go…but like personally owned cars, on-premise infrastructure tends to be underutilized when companies
purchase entire servers to facilitate small increases in demand.14 And, as technology advances, the private
cloud/car owner might become dependent on less professional technicians to maintain an old clunker while
everyone else drives a shiny new car with the latest technology.
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The various “as-a-service” models, on the other hand, allow consumers access to the end product
(transport) in a variety of ways. To continue the vehicle metaphor, SaaS is like using a bus to get to work. All
equipment procurement, vehicle maintenance, route creation, pickup locations, time schedules, and driving is
taken care of by public transportation. The customer needs only to select a bus route that meets their transport
needs and show up, just as a business could select software under a certain number of predetermined
constraints. Dropbox, Gmail, Salesforce, and Slack are examples of SaaS programs in which users access
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applications remotely and on demand, rather than needing the processing power of their own hardware. These
service models also typically follow a subscription price model, in which the vendor takes care of all software
and hardware management, and the customer simply logs on for immediate use.15

7 “IaaS vs. PaaS vs. SaaS,” IBM Cloud Education, September 2, 2021, https://www.ibm.com/cloud/learn/iaas-paas-saas (accessed Nov. 30, 2022).
8 “What Is Cloud Computing?” Azure, https://azure.microsoft.com/en-us/resources/cloud-computing-dictionary/what-is-cloud-computing/
(accessed Nov. 30, 2022).
9 https://www.ibm.com/cloud/learn/iaas-paas-saas.
10 Eric Knorr, “What Is Cloud Computing? Everything You Need to Know Now,” InfoWorld, July 22, 2022,
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https://www.infoworld.com/article/2683784/what-is-cloud-computing.html (accessed Nov. 30, 2022).

11 “What Is IaaS?” Azure, https://azure.microsoft.com/en-us/resources/cloud-computing-dictionary/what-is-iaas/ (accessed Nov. 30, 2022).
12 “What Is PaaS?” Azure, https://azure.microsoft.com/en-us/resources/cloud-computing-dictionary/what-is-paas/ (accessed Nov. 30, 2022).
13 “What Is SaaS?” Azure, https://azure.microsoft.com/en-us/resources/cloud-computing-dictionary/what-is-saas/ (accessed Nov. 30, 2022).
14 Jerry Hirsch, “Ride-sharing Forces Automakers to Rethink How They Sell Cars,” Los Angeles Times, June 27, 2015,
https://www.latimes.com/business/autos/la-fi-0628-ford-car-sharing-20150628-story.html; Zachary Flower, “On Premises vs. Cloud: The Major
Similarities and Differences,” TechTarget, October 11, 2021, https://www.techtarget.com/searchcloudcomputing/tip/Evaluate-on-premises-vs-cloud-
computing-pros-and-cons (both accessed Jan. 4, 2023).
15 Gleb B. and Dmitriy G., “Choosing the Right Cloud Service: IaaS, PaaS, or SaaS,” RubyGarage (blog), January 8, 2020,

https://rubygarage.org/blog/iaas-vs-paas-vs-saas (accessed Jul. 15, 2021).

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[email protected] or 617.783.7860
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IaaS is like a car rental: the rental company carries all the overhead costs, and the consumer pays only for
the miles they drive. Amazon designed this infrastructure model and introduced it in 2006 with the launch of
its Elastic Compute tool, which ushered in the era of cloud. Users can pay as they use computing power, storage,
and servers, replacing the need for businesses to invest in traditional, on-premise data center hardware. IaaS’s
customers typically have dedicated IT experts because they still need to manage hosted applications and

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operating systems, just like a car renter who manages parking, route creation, and driving.

PaaS is like hiring a car service: the driving is taken care of but the passenger can customize the pickup
time and location, has some flexibility to choose the route to the final destination, and maintains the freedom
to experiment with when and to what location they want a ride. PaaS is like this car service in that it grants
access to a predesigned platform for developers to create, test, and manage software applications and websites.
The vendor provides generic software code as the building blocks to customize software applications without
starting from scratch or worrying about managing the infrastructure.16

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Another service model, which is not mentioned by NIST but is growing in the cloud computing space, is
Backend-as-a-Service (BaaS).17 BaaS is like hiring a yellow New York City sedan taxi—a less customizable and
more specialized version of PaaS. All behind-the-scenes aspects of web and mobile applications (server-side
functionalities) are outsourced to BaaS providers, and developers focus on front-end or user-side applications.18
Via software developers’ kits (SDKs) and application programming interfaces (APIs), BaaS integrates
developers’ mobile and web applications to cloud services such as database management, cloud storage, user
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authentication, push notification, hosting, and remote updating.19 Similar to BaaS, a New York City taxi’s car
type, color, and size is predetermined, and passengers focus only on the route, destination, and pickup time and
location. Typical users of BaaS range from start-ups to enterprises wanting to quickly and seamlessly launch a
web or mobile application with moderate requirements without worrying about the back-end complexities (e.g.,
cross-platform development, coding resources, and so forth). Like a yellow taxi, BaaS solutions lock customers
into a single vendor, are simple and standard, and have limited scalability based on the provider’s cloud
infrastructure and speed of back-end development.20 Exhibit 1 shows how each cloud service model’s
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responsibilities compare to one another.

NIST’s summary also includes an overview of the four development models that emerged: public, private,
hybrid, and multi-cloud. Public cloud users rent the computing resources via the internet through a third-party
cloud provider (e.g., Amazon Web Services [AWS]), which manages all the setup, maintenance, and
administrative tasks of the data centers. This is called public because other organizations share the same
infrastructure. Public cloud has gained in adoption since 2010. In fact, in 2020, for the first time, cloud
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infrastructure services spending caught up to private data center hardware and software spending, signaling a
shift from investing only in private data centers to partnering with a public cloud service provider instead of or
in addition to the private centers.21 Private cloud is provided by and available exclusively to one organization,
meaning the enterprise invests in its own data center infrastructure, implementation, and maintenance.
Particularly in the early adoption stages of the cloud, health care companies, defense companies, and

16 Stephen Watts and Muhammad Raza, “SaaS vs. PaaS vs. IaaS: What’s the Difference & How to Choose,” BMC Blogs, July 15, 2019,

https://www.bmc.com/blogs/saas-vs-paas-vs-iaas-whats-the-difference-and-how-to-choose/ (accessed Jul. 15, 2021).

17 “What Is BaaS (Backend as a Service)? Definition and Usage,” Okta, https://www.okta.com/identity-101/baas-backend-as-a-service/ (accessed
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Jan. 3, 2023).
18 “What Is BaaS?: Backend-as-a-Service vs. Serverless,” Cloudflare, https://www.cloudflare.com/learning/serverless/glossary/backend-as-a-service-

baas/ (accessed Jul. 21, 2021).

19 “Backend as a Service (BaaS),” Techopedia, May 12, 2017, http://www.techopedia.com/definition/29428/backend-as-a-service-baas (accessed Jul.

21, 2021).
20 Sofiya Merenych, “The Hard Choice between Mobile Backend as a Service and Custom Backend Explained with Pizza,” Clockwise Software,

August 20, 2019, https://clockwise.software/blog/choice-between-mobile-backend-as-a-service-and-custom-backend/ (accessed Jan. 3, 2023).

21 “2020 – The Year that Cloud Service Revenues Finally Dwarfed Enterprise Spending on Data Centers,” Synergy Research Group, March 18, 2021,

https://www.srgresearch.com/articles/2020-the-year-that-cloud-service-revenues-finally-dwarfed-enterprise-spending-on-data-centers (accessed Aug.

4, 2021).

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government agencies typically created a private cloud for privacy reasons (which were often required by law).
Companies using the hybrid cloud model combine the two by partnering with a cloud service provider and
maintaining private data centers and hardware for use. Finally, the multi-cloud approach uses multiple public
cloud providers for risk mitigation but requires a dedicated internal technology team to implement them,
because codes across providers are not compatible.

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Cloud Adoption: Demand

In 2020, worldwide spending on public cloud services climbed to nearly $260 billion.22 At the same time,
more companies were building cloud-native software, and cloud-native start-ups were accelerating in number.
Illustrative of the trend, the Cloud Native Computing Foundation, an organization designed solely to promote
and educate on cloud-native projects, saw its membership grow to over 50 members, including Uber, Airbnb,

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Netflix, Adidas, Spotify, Mastercard, and Morgan Stanley.23

As technology advances rapidly, many companies are confronted with increasingly outdated IT
infrastructure and a lack of programming talent, and both established companies and start-ups can be reluctant
to provide the capital required to invest in complex and costly data centers. Incorporating a public cloud
option—or multiple options—into IT strategy would be a clear cost move alongside more strategic goals of
remaining agile and innovative in an increasingly digital world. For example, a large financial-information
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provider could enable faster and less-expensive entry into promising markets using its customer-facing
applications if these applications were housed on the cloud rather than internal servers.24 Retailers could meet
huge fluctuations in demand associated with major events like Cyber Monday. Health care providers could
more seamlessly work with insurers in real time to understand and approve billing for health conditions in
response to shifting trends in care. The benefits are vast but vary from company to company.

Cost considerations and scalability

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Significant capital is required to build and maintain private, on-premise servers. By enlisting a cloud service
provider instead, a business can reduce its fixed IT costs, including capital expenditures on hardware and
virtualization setup. Amazon estimated that its direct cost improvements due to operating in the cloud versus
on premises were, on average, 30%.25 Additionally, companies can more efficiently allocate costs using the pay-
as-you-use service model, significantly reducing wasted spending on reserving unneeded server space.
Furthermore, researchers in 2015 estimated that servers were idle 30% of the time, demonstrating severe
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underutilization.26 With the new elasticity offered by cloud, businesses hope to achieve perfect utilization and
zero wasted spending.27

22 Katie Costello and Meghan Rimol, “Gartner Forecasts Worldwide Public Cloud Revenue to Grow 6.3% in 2020,” Gartner press release, July 23,

2020, https://www.gartner.com/en/newsroom/press-releases/2020-07-23-gartner-forecasts-worldwide-public-cloud-revenue-to-grow-6point3-
percent-in-2020# (accessed Jul. 15, 2021).
23 Keri Allan, “2019 Will Be the Year Cloud-Native Becomes the New Norm,” Bloomberg Professional Services, May 28, 2019,

https://www.bloomberg.com/professional/blog/2019-will-year-cloud-native-becomes-new-norm/ (accessed Jul. 15, 2021).

24 Chhavi Arora, Tanguy Catlin, Will Forrest, James Kaplan, and Lars Vinter, “Three Actions CEOs Can Take to Get Value from Cloud Computing,”
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McKinsey Quarterly, July 21, 2020, https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/three-actions-ceos-can-take-to-get-

value-from-cloud-computing (accessed Jul. 22, 2021).
25 Amazon annual report, 2020, https://s2.q4cdn.com/299287126/files/doc_financials/2021/ar/Amazon-2020-Annual-Report.pdf (accessed Jun.

21, 2021).
26 Andy Patrizio, “Research Finds One-Third of Data Center Servers Are Idle,” ComputerWorld, June 10, 2015,
https://www.computerworld.com/article/2934393/research-finds-one-third-of-data-center-servers-are-idle.html (accessed Jun. 12, 2021).
27 Johann Schleier-Smith, Vikram Sreekanti, Anurag Khandelwal, Joao Carreira, Neeraja J. Yadwadkar, Raluca Ada Popa, Joseph E. Gonzalez, Ion

Stoica, and David A. Patterson, “What Serverless Computing Is and Should Become: The Next Phase of Cloud Computing,” Communications of the ACM
64, no. 5 (May 2021): 76–84, https://cacm.acm.org/magazines/2021/5/252179-what-serverless-computing-is-and-should-become/fulltext (accessed
Jun. 13, 2021).

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At the same time, cloud-based businesses do not have to worry about underserving customers or being
unable to scale appropriately. During spikes in demand, cloud infrastructure providers can easily add or turn
off servers to manage the workload. Companies can leverage this service to ensure they will never run out of
required server space and can continue to roll out changes in digital offerings quickly due to the scalability
associated with the rented cloud infrastructure.

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Competitive advantage

Increasing data hosting and processing needs means that IT departments are spending most of their time
addressing infrastructure and maintenance issues, rather than developing new applications or services. In fact,
in 2010, Microsoft found that development was allocated just 11% of an average IT budget, much of which
was used toward “strategic” efforts like purchasing or deploying a new enterprise solution.28 This leaves very
little time for IT employees to roll out new applications, lengthening businesses’ time to market. Outsourcing

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the infrastructure and maintenance responsibility, at least partially, to a cloud provider frees up time for
engineers to focus on new solutions for quicker and more effective customer interactions.

Another benefit is quick access to algorithms and data tools that provide insight into consumer behavior.
With technological expertise and scale, cloud providers invest in tools that focus on understanding, predicting,
and influencing consumer behavior, thereby equipping their partners with insights that allow them to meet new
market demand and shift their strategic priorities.29
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Improved efficiency

Shorter time to market also results from the cloud’s impact on collaboration and productivity. According
to analytics by the Harvard Business Review, collaboration was the top-cited driver of cloud adoption among chief
information officers surveyed in 2015.30 With less-cumbersome processes to share and update information,
companies were seeing increased productivity and faster project timelines internally and with external
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stakeholders and partners.

Furthermore, the start-up time for launching new applications can be reduced by 50% through an as-a-
service (aaS) model, due to standardized and specialized approaches by the provider.31 Because the cloud
provider already has the server capacity and ability to scale, companies do not have to configure and maintain
servers for the new business use and instead are able to rapidly launch and optimize IT for the specific data and
computing power needed.
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Talent

Data centers rely on highly skilled workers who “know how to configure and maintain computer hardware,
software, and networking systems.”32 Their unique skill sets demand wages significantly higher than the national
average, and the availability of qualified labor is limited. Therefore, another benefit of aaS partnerships is the
access to talent from high-paying cloud service providers.
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28 Andrew McAfee, “What Every CEO Needs to Know about the Cloud,” Harvard Business Review 89, no. 11 (November 2011): 124–32,

https://hbr.org/2011/11/what-every-ceo-needs-to-know-about-the-cloud (accessed Jun. 14, 2021).

29 https://hbr.org/2011/11/what-every-ceo-needs-to-know-about-the-cloud.
30 Thor Olavsrud, “Collaboration Now Tops List of Cloud Computing Drivers,” CIO, August 14, 2015,
https://www.cio.com/article/2971521/collaboration-now-tops-list-of-cloud-computing-drivers.html (accessed Jul. 22, 2021).
31 “Cloud Migration: Understanding What It Is and How It Can Transform Your Business,” Accenture, https://www.accenture.com/us-

en/insights/cloud-migration-index (accessed Jun. 14, 2021).

32 “Managed Application & Network Services Industry Profile,” Dun & Bradstreet First Research, May 31, 2021.

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Disaster recovery

In the event of power outages, cloud technology can also reduce downtime and ensure rapid data recovery
for service users. Given the scale of cloud infrastructure providers—for example, in 2023, Amazon had 96
availability zones (areas with multiple data centers) in 30 geographic regions—cloud providers run applications

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redundantly across their zones to mitigate risks such as natural disasters, terrorist attacks, or other events.33

In many circumstances, cloud computing offers a multitude of advantages over on-premise computing
processes. But conversely, cloud computing can include some negative characteristics that might hinder
businesses. Furthermore, some aspects of cloud computing that might be advantageous in one scenario can
also serve as disadvantages in another.

Outages

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Cloud outages are exactly what they sound like—a period in which a cloud provider’s infrastructure is down
and inoperable, so their customers do not have access to cloud services. Despite cloud providers agreeing to
Service Level Agreements that promise as much as 99.999% service availability, outages persist. Common
causes of cloud outages include power outages, overloaded data centers, maintenance, and human error.34

Greater costs
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Cost reduction is commonly discussed as an advantage of cloud services. While cloud computing has the
potential to reduce costs, it is certainly not free. In fact, some companies have migrated to the cloud only to
find that the shift does not result in the returns that they hoped for. One cloud consulting firm, Lucidity, noted
that many companies tend to pay for excessive cloud storage to hedge against feared cloud outages.35 Another
cloud consultant at TL Consulting Group noted that it can take months or even years for businesses to
proficiently implement cloud services in a manner that results in actualized cost reduction.36
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Latency

Another issue that can arise in businesses that rely on cloud services is high latency. Latency, in this context,
means the length of time it takes for data to move from the provider’s infrastructure to the customer.37 When
businesses suffer from higher latency, productivity can diminish and applications can slow down—even to the
point of crashing.38 Customer-facing applications with high latency can frustrate users and potentially cause
them to abandon a business entirely.39
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33 “Global Infrastructure,” Overview of Amazon Web Services, AWS Whitepaper, https://docs.aws.amazon.com/whitepapers/latest/aws-

overview/global-infrastructure.html (accessed Jun. 21, 2021); “AWS Global Infrastructure,” Amazon Web Services, https://aws.amazon.com/about-
aws/global-infrastructure/ (accessed Jan. 6, 2023).
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34 Muhammad Raza, “What Is a Cloud Outage? Cloud Outages Explained,” Multi-Cloud Blog (blog), bmc, April 2, 2019,

https://www.bmc.com/blogs/cloud-outage/ (accessed Nov. 30, 2022).

35 https://www.forbes.com/sites/davidprosser/2022/09/08/realising-the-potential-of-cloud-computing-with-lucidity/?sh=5bc3d5353bf2.
36 https://tlconsulting.com.au/reasons-to-move-and-reasons-not-to-move-to-the-public-cloud/.
37 Franklin Okeke, “Disadvantages of Cloud Computing,” TechRepublic, September 27, 2022, https://www.techrepublic.com/article/disadvantages-

cloud-computing/ (accessed Nov. 30, 2022).

38 “What Is Network Latency?,” AWS, https://aws.amazon.com/what-is/latency/ (accessed Nov. 30, 2022).
39 Kenny Kleinerman, “What Is Latency? And What Can I Do about It?,” Ridge, October 5, 2021, https://www.ridge.co/blog/what-is-latency/

(accessed Nov. 30, 2022); “The Impact of Network Latency on the End User Experience,” Datapath.io (blog), medium,
https://medium.com/@datapath_io/the-impact-of-network-latency-on-the-end-user-experience-1f9755c140c8 (accessed Nov. 30, 2022).

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[email protected] or 617.783.7860
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Security

Security has always been a concern for businesses. The only change when a company integrates cloud
services is that the cloud provider also bears some responsibility for maintaining a strong level of security.40
Surveys have revealed that unauthorized access and vulnerable APIs are considered the biggest security risks

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for businesses leveraging cloud services. 41 And since cloud services are connected to the internet, they are often
the victim of cyberattacks.42

Cloud Adoption: Supply

From 2010 to 2020, the cloud computing and hosting market grew by 624%, and projections show no sign
of slowing down.43 While SaaS continues to be the largest spending category, IaaS is responsible for the largest

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year-over-year growth (34%), with PaaS not far behind (32%), according to an International Data Corporation
(IDC) report from 2020.44 The United States and Europe have more mature cloud markets, while China is
gaining speed and projected to experience the highest growth from 2020 to 2025.45

IaaS accelerated rapidly as public cloud titans (AWS, Microsoft Azure, and Google Cloud Services [GCP])
sought to cement their relative market leads in the public cloud space. In fact, from 2019 to 2020, public cloud
providers increased their spending on data center infrastructure by 25%, while enterprise spending on non-
public options decreased by 3% over the same time.46 See Exhibit 2 for more details on cloud provider
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spending. As technology companies, the giants remained relatively insulated from COVID-19 pandemic–
induced hits to revenues, which equipped the companies with capital to continue investing in data centers,
machine learning, and acquisition of technical talent.

The spike in infrastructure spending centered on the construction of hyperscale data centers, which
numbered 541 by the end of 2020, according to Synergy Research Group.47 To qualify as hyperscale, a center
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needs to meet four requirements: it has to maximize cooling efficiency, allocate electrical power in discrete
packages, ensure electricity availability, and balance workloads across servers.48 In most cases, meeting these
requirements corresponds with size, qualifying hyperscale facilities as “mega” centers with at least 225,000
square feet of computing space.49 This architecture has been compared to that of a factory “where every
component involved in the manufacture of a product, including the conveyor that brings the parts onto the
assembly line, were modularized into a small area.”50 The functionality of this model has become so efficient
No

40 Dimitri Antonenko, “Cloud Computing Security Issues and Challenges,” BusinessTech Weekly, January 4, 2021,
https://www.businesstechweekly.com/cybersecurity/data-security/cloud-computing-security-issues-and-challenges/ (accessed Nov. 30, 2022).
41 Chris Preimesberger, “Cloud Computing Pros and Cons: The Good, the Bad, and the Gray Areas,” ZDNet, September 20, 2021,

https://www.zdnet.com/article/cloud-computing-pros-and-cons/ (accessed Nov. 30, 2022).

42 “Top 15 Cloud Security Issues, Threats and Concerns,” Check Point, https://www.checkpoint.com/cyber-hub/cloud-security/what-is-cloud-

security/top-cloud-security-issues-threats-and-concerns/ (accessed Nov. 30, 2022).

43 Kimberly Mlitz, “Hosting and Cloud Computing Market Size Worldwide 2010–2020,” Statista, January 12, 2021,
https://www.statista.com/statistics/500541/worldwide-hosting-and-cloud-computing-market/ (accessed Jun. 14, 2021).
44 Michael Shirer, “Worldwide Public Cloud Services Market Totaled $312 Billion in 2020 with Amazon Web Services and Microsoft Vying for the

Top Position Overall, According to IDC,” IDC press release, May 13, 2021,
https://www.businesswire.com/news/home/20210513005338/en/Worldwide-Public-Cloud-Services-Market-Totaled-312-Billion-in-2020-with-
Do

Amazon-Web-Services-and-Microsoft-Vying-for-the-Top-Position-Overall-According-to-IDC (accessed Jan. 3, 2023).

45 “Managed Application & Network Services Industry Profile,” Dun & Bradstreet First Research, May 31, 2021.
46 Mark Haranas, “Why Public Cloud Data Center Spending Is at an All-Time High,” CRN, September 10, 2020, https://www.crn.com/news/data-

center/why-public-cloud-data-center-spending-is-at-an-all-time-high?itc=refresh (accessed Jul. 22, 2021).

47 “Hyperscale Data Center Count Reaches 541 in Mid-2020; Another 176 in the Pipeline,” Synergy Research Group, July 7, 2020,

https://www.srgresearch.com/articles/hyperscale-data-center-count-reaches-541-mid-2020-another-176-pipeline (accessed Jul. 22, 2021).

48 Scott Fulton III, “How Hyperscale Data Centers Are Reshaping All of IT,” ZDNet, April 5, 2019, https://www.zdnet.com/article/how-hyperscale-

data-centers-are-reshaping-all-of-it/ (accessed Jul. 22, 2021).

49 https://www.zdnet.com/article/how-hyperscale-data-centers-are-reshaping-all-of-it/.
50 https://www.zdnet.com/article/how-hyperscale-data-centers-are-reshaping-all-of-it/.

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that it can scale up exponentially or turn off when not in use. Thus, hyperscale centers can achieve economies
of scale that improve speed, computing power, and power usage effectiveness.

Economies of scale

In 2021, the leading cloud providers—Amazon, Microsoft, Google—each had 60 or more hyperscale

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locations distributed across the globe.51 See Exhibit 3 for a comparison of these three cloud providers. With
such scale, they can obtain low-cost deals with hardware suppliers, including IBM, Inspur, Dell, Microsoft, and
Huawei, making building costs less expensive than if a private entity were building its own center.52 Recurring
costs are also optimized through increased efficiency. The largest operational expense in most data centers is
power (40%–80%) for both powering the servers and controlling the climate, so hyperscale centers have an
incentive to improve efficiency. With the architecture of hyperscale, a company can compartmentalize high
computing workloads and balance workloads across servers, to direct power only on the server area needed or

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to prevent overheating of one area, respectively. The improved efficiency can be measured by the power usage
effectiveness (PUE) metric: many enterprise data centers reported an average PUE of 1.67–1.8, whereas
Google’s hyperscale centers reported a PUE of 1.1.53 A PUE score of 1.0 translates to perfect efficiency.
Ongoing networking costs are also reduced, given that network provider rates are often offered at a bulk
discount to the entities managing the large data centers. Finally, staff costs factor into the total cost of
ownership, and the tech giants have the resources to offer competitive pay and training.54

The size that allows for the bulk discounts and ongoing efficiency, however, is a hurdle for many private
op
companies. According to the US Chamber of Commerce, in 2017, building a data center cost an average of
$215.5 million for 165,000 net rentable square feet and required $18.5 million in annual operating
expenditures.55 Moreover, the rapid acceleration of innovation in this space requires technical expertise and
ongoing investment in research and development.

Value proposition
tC

Cloud providers fill a market need by fulfilling customers’ variable and unpredictable IT needs. The value
proposition they offer includes the expertise needed to manage increasingly complex technology and the
responsibility for data protection and maintenance. As they continue to invest billions in their cloud
infrastructure and computing abilities, providers also tout analytics capabilities that private servers do not always
incorporate.56 Furthermore, providers gain a profit opportunity by more efficiently assigning customers to the
shared resource pool than a business could using its own dedicated resources.
No

Cloud Provider Landscape

Given cloud computing’s numerous customer benefits and growing supply, start-ups and large enterprises
are considering how cloud infrastructure providers can play a role in managing their digital operations. The
Do

51 https://www.srgresearch.com/articles/hyperscale-data-center-count-reaches-541-mid-2020-another-176-pipeline.
52 https://www.crn.com/news/data-center/why-public-cloud-data-center-spending-is-at-an-all-time-high?itc=refresh.
53 “What Is a Hyperscale Data Center?,” Vertiv, https://www.vertiv.com/en-asia/about/news-and-insights/articles/educational-articles/what-is-a-

hyperscale-data-center/ (accessed Jul. 15, 2021).

54 “How Much Does It Cost to Own a Data Center?,” Data Foundry (blog), August 25, 2020, https://www.datafoundry.com/blog/how-much-does-

it-cost-to-own-a-data-center (accessed Jul. 15, 2021).

55 Tim Day and Nam D. Pham, Data Centers: Jobs and Opportunities in Communities Nationwide, US Chamber of Commerce Technology Engagement

Center, 2017, https://www.uschamber.com/sites/default/files/ctec_datacenterrpt_lowres.pdf (accessed Jun. 21, 2021).

56 Dan Meyer, “Google Pledges $10B Investment in Data Centers, Offices This Year,” SDXCentral, February 26, 2020,
https://www.sdxcentral.com/articles/news/google-to-invest-10b-in-data-centers-offices-this-year/2020/02/ (accessed Jun. 14, 2021).

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[email protected] or 617.783.7860
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result has been a booming cloud infrastructure market where the key players continue to fight for a share of
the expanding pie, which is expected to grow at a compound annual growth rate of 18% until 2028.57

In the IaaS market, date of market entry is positively correlated with market share: the first to enter has the
highest market share. Amazon’s cloud, which became an official offering in 2006, had a 33% market share by

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year-end 2020. Microsoft, the second to market, had 20%.58 Google, Alibaba, and Tencent are behind but
gaining speed with high growth rates and solid brand recognition. IBM leads the niche players segment, with
Oracle, SAP, Salesforce, Fujitsu, and NTT following.59 See Exhibit 4 for an illustration of cloud provider
position in the first quarter of 2021. In good news for those behind, there is an overall shift from mono-cloud
to multi-cloud, as many organizations try to diversify their IT infrastructure. In response, the competition takes
different avenues to winning over consumers, from specializing in specific industry verticals to offering higher
levels of service.

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Amazon Web Services (AWS)

AWS was Amazon’s unintentional golden child: after starting as an effort to help third-party retailers build
online sites on top of Amazon’s e-commerce engine, it turned into the world’s first IaaS offering. As the first
to market, AWS has continued as the market leader and grown to account for an increasing share of the
company’s operating margins.60 In 2015, the first year that Amazon separated AWS from the two retail business
segments (North America and International), AWS delivered a 19% operating margin and accounted for 7%
of the company’s net sales, but 67% of its operating margins. By 2022, AWS was delivering 29% operating
op
margins and accounted for 16% of sales, and it was the only business segment with a positive operating
income—of $22.8 billion—compared to a consolidated operating income of $12.2 billion.61 (While
International has proven consistently unprofitable, the North America segment has been delivering significant
operating profits until 2022, when it turned negative due to overinvestment in capacity expansion.) See
Exhibit 5 for a representation of Gartner’s 2022 Magic Quadrant for the Cloud Infrastructure and Platform
Services Market.
tC

AWS started in the first decade of the 21st century, when the company needed to develop consistent APIs
so internal teams would not have to start from the beginning each time they partnered with a new client. As
consumers responded positively to this informal developer tool, Amazon realized this service was worth
investing in. Just a few years later, what started as an initiative to streamline technical processes soon became
infrastructure services and the linchpin to Amazon’s reputation as a pioneer in cloud computing. AWS was
officially launched in 2006; its first products were the Simple Storage Service (S3) and Elastic Compute Cloud
No

(EC2). As of 2021, AWS offered over 200 services across aaS categories, including IaaS, PaaS, BaaS, and SaaS,
and boasted the “most functionality, most secure, and most proven operational expertise” for its millions of
customers across industries and of varying sizes. Some big-name clients included Intuit, Netflix, General
Electric, Expedia, Lyft, Siemens, and McDonald’s Corp.62

57 Cloud Computing Market Size, Share & COVID-19 Impact Analysis, by Type (Public Cloud, Private Cloud, Hybrid Cloud), by Service (Infrastructure as a Service

(IaaS), Platform as a Service (PaaS), Software as a Service (SaaS)), by Industry (Banking, Financial Services, and Insurance (BFSI), IT and Telecommunications, Government,
Consumer Goods, and Retail, Healthcare, Manufacturing, Others), and Regional Forecast, 2021–2028, Fortune Business Insights, May 2021
https://www.fortunebusinessinsights.com/cloud-computing-market-102697 (accessed Jun. 21, 2021).
58 Kimberly Mlitz, “Cloud Infrastructure Services Market Share Quarterly Worldwide 2017–2020, by Vendor,” Statista, April 21, 2021,
Do

https://www.statista.com/statistics/477277/cloud-infrastructure-services-market-share/ (accessed Jul. 22, 2021).

59 “Amazon and Microsoft Maintain Their Grip on the Market but Others Are Also Growing Rapidly,” Synergy Research Group, April 29, 2021,

https://www.srgresearch.com/articles/amazon-and-microsoft-maintain-their-grip-market-others-are-also-growing-rapidly (accessed Jul. 29, 2021).

60 Ron Miller, “How AWS Came to Be,” TechCrunch, July 2, 2016, https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-the-genesis-of-

aws (accessed Jul. 22, 2021); Justin Pope, “AWS Chief Says Amazon’s Most Profitable Segment Is Just Getting Started,” Motley Fool, July 7, 2022,
https://www.fool.com/investing/2022/07/07/aws-chief-says-amazons-most-profitable-segment-is/ (accessed Jan. 9, 2023).
61 Amazon annual report, 2022, https://s2.q4cdn.com/299287126/files/doc_financials/2023/ar/Amazon-2022-Annual-Report.pdf (accessed Oct.

13, 2023).
62 Jon Swartz, “How Amazon Created AWS and Changed Technology Forever,” MarketWatch, December 7, 2019,
https://www.marketwatch.com/story/how-amazon-created-aws-and-changed-technology-forever-2019-12-03 (accessed Jul. 22, 2021).

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According to Gartner, AWS earned the largest annual financial components among hyperscale providers
in 2020, reinforcing that it was the “most commonly chosen for strategic, organizational wide adoption.”63 It
also had a wide range of customer profiles, from start-ups to small businesses to large enterprises, and had a
strong record of customer success. Still, analysts cautioned that the first-to-market giant might have been so
pressured to move fast that it overlooked upgrades and feature functionality, illustrating tradeoffs that had to

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be considered in a cloud provider decision.

Microsoft Azure

In 2010, software giant Microsoft scrambled to release its own cloud product to compete with AWS:
Windows Azure, later rebranded in 2014 as Microsoft Azure. Microsoft decided to launch Azure as a PaaS
offering because of its developer platform and tools heritage.64 As of 2021, Azure offered cloud services
including PaaS, SaaS, and IaaS.

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Founded in 1975, Microsoft has been the global computer software company of choice for schools,
enterprises, and personal computers for decades. Utilizing its legacy and long-standing relations with corporate
leadership, Microsoft was the perceived favorite of risk-averse late cloud adopters, large multinational
corporations, and regulated industries. As showcased by a 2019 comment from AT&T Inc.’s spokesperson
discussing its Azure deal, “We’ll work with Microsoft because they have experience with doing this and helping
large enterprises.”65 Betting on the corporate hybrid cloud strategy, in 2017 and 2019, Microsoft launched
products like Azure Stacks and Azure Arc, which ran Windows cloud technology on customers’ in-house data
op
centers.66 Azure Arc in particular can manage server resources in both hybrid and multi-cloud models. Azure
became the safe global cloud choice because of the Microsoft brand, list of Azure clients, and the seamless
integration of Windows products to Azure.67 Azure cloud was the next addition to Microsoft’s all-in-one
enterprise computing packages, which already included Office 365, Teams, and Windows.

In 2021, Microsoft Azure was in second place behind AWS in public cloud market share with 19%,
tC

according to Gartner. Azure had 60 availability zones in 60 geographical locations—more locations than any
other provider. Because of Microsoft’s reputation and products, in 2019 the US Pentagon awarded Microsoft
(over AWS) the Joint Enterprise Defense Infrastructure (JEDI) contract, for $10 billion over 10 years, though
this was canceled later in 2021 in favor of a multi-vendor approach.68 Sustainability is also part of Microsoft’s
strategy, highlighted by its negative carbon target by 2030. The company opened 100% renewable data centers
in Sweden in 2020, is testing underwater data centers, and prioritizes transparency around energy usage.

Google Cloud Platform

No

Google’s cloud service, GCP, was launched in 2008 but was not available generally until 2011, five years
after AWS. In 2008, Google App Engine, the industry’s first PaaS offering, delighted the developer community.
Google built its reputation as an innovator in technology, starting with the search engine that organized the
chaos on the internet, and it became the company that connected users with the internet through an array of

63 Raj Bala, Bob Gill, Dennis Smith, and David Wright, “Gartner Magic Quadrant for Cloud Infrastructure as a Service, Worldwide,” Gartner, July

16, 2019, https://www.gartner.com/en/documents/3947472/magic-quadrant-for-cloud-infrastructure-as-a-service-wor (accessed July 23, 2021).

Do

64 Janakiram MSV, “A Look Back at Ten Years of Microsoft Azure,” Forbes, February 3, 2020,
https://www.forbes.com/sites/janakirammsv/2020/02/03/a-look-back-at-ten-years-of-microsoft-azure/ (accessed Jul. 15, 2021).
65 Angus Loten, “Microsoft’s Focus on Big Customers Propels Cloud Sales,” Wall Street Journal, July 23, 2019,
https://www.wsj.com/articles/microsofts-focus-on-big-customers-propels-cloud-sales-11563922819 (accessed Jul. 15, 2021).
66 Aaron Tilley, “Microsoft Ramps Up Battle against Amazon in Cloud War,” Wall Street Journal, November 4, 2019,
https://www.wsj.com/articles/microsoft-steps-up-push-to-dominate-hottest-segment-of-the-cloud-11572876001 (accessed Jul. 15, 2021).
67 Dana Mattioli and Aaron Tilley, “Amazon Has Long Ruled the Cloud. Now It Must Fend Off Rivals,” Wall Street Journal, January 4, 2020,

https://www.wsj.com/articles/amazon-has-long-ruled-the-cloud-now-it-must-fend-off-rivals-11578114008 (accessed Jul. 15, 2021).

68 John D. McKinnon, “Pentagon Scraps JEDI in Win for Amazon at Microsoft’s Expense,” Wall Street Journal, July 6, 2021,

https://www.wsj.com/articles/pentagon-plans-reboot-of-jedi-cloud-contract-11625589039 (accessed Jul. 15, 2021).

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useful free software products. Google’s empire includes YouTube, AdWords, G-Suite, and Android. The
company has grown to a market value of over $1 trillion.69 Even though Google was late to the cloud provider
space and in 2021 had a modest 7% public cloud infrastructure market share, its cloud services integrate well
with other Google services.70

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Since GCP is in a distant third place for US public cloud market share, its strategy for customer acquisition
is different from those of its competitors: bundling Google products and services, targeting specific industries,
offering industry-specific solutions, marketing a multi-cloud option, and focusing on its artificial intelligence
(AI) and machine-learning prowess. For example, GCP’s deal with Univision Communications in April 2021
highlighted Google’s bundling-of-services strategy, which taps into its advertising and search services and
machine-learning expertise.71 Google strengthened its name in the AI and machine-learning space with the
release of its own machine-learning chips, called the Tensor Processing Units (TPUs), that enabled deep
learning.72 In the fourth generation by 2021, the TPUs were seven times faster than anything else on the market.

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Additionally, Google engineers developed TensorFlow, the most popular open-source machine-learning
platform among industry experts.73 Although niche in 2021, TPUs and TensorFlow exemplify Google’s
technical expertise that lures performance-focused cloud users. The average GCP client is a novice in machine
learning or AI, and Google wins users by exposing the possibilities of data analytics on GCP.

Despite its size and over-20-year history, Google continues to operate like a start-up, and this culture is a
strength and weakness in the cloud competition. Google’s handling of enterprise accounts revealed some
op
immaturity surrounding processes and procedures (e.g., discounting independent software vendors [ISVs],
contract negotiations, and integration of enterprise support and systems).74 On the other hand, Google’s
Customer Reliability Engineering program is a successful example of its unique industry solutions and focus
on customer education.

Alibaba Cloud
tC

Alibaba Cloud was launched in 2009, and by 2020, it was the leading IaaS cloud provider in China, with
42% market share. In 2020, 90% of Alibaba Cloud’s revenue came from China.75 Founded in 1999 by
schoolteacher Jack Ma, Alibaba was created to be the Chinese equivalent to the US e-commerce sites. In 2014,
Alibaba’s IPO on the New York Stock Exchange raised $25 billion, and it had a market capitalization above
$570 billion as of June 2021.76 Alibaba was able to rise in popularity because its marketplace mirrored the
Chinese culture, it provided a novel online marketplace for the Chinese public, and the Chinese government’s
restriction of foreign businesses in the early 2000s protected Alibaba from competition.77
No

Alibaba made significant investments in the cloud, AI, and machine learning, and analysts considered its
offerings comparable to those of other global hyperscale providers. However, because of Alibaba’s strong ties

69 “Alphabet Inc. (GOOG) Stock Price, News, Quote & History,” Yahoo! Finance, https://finance.yahoo.com/quote/GOOG/ (accessed Jul. 15,

2021).
70 “Global Cloud Services Market Q1 2021,” Canalys, April 29, 2020, https://www.canalys.com/newsroom/global-cloud-market-

Q121?time=1626379571 (accessed Jul. 15, 2021).

71 Aaron Tilley and Tripp Mickle, “Google Bundles Products to Land Univision Cloud Deal,” Wall Street Journal, April 26, 2021,

https://www.wsj.com/articles/google-bundles-products-to-land-univision-cloud-deal-11619449740 (accessed Jul. 15, 2021).

Do

72 Kyle Wiggers, “Google Claims Its New TPUs Are 2.7 Times Faster Than the Previous Generation,” VentureBeat, July 29, 2020,

https://venturebeat.com/2020/07/29/google-claims-its-new-tpus-are-2-7-times-faster-than-the-previous-generation/ (accessed Jul. 15, 2021).

73 Bo Pang, Erik Nijkamp, and Ying Nian Wu, “Deep Learning with TensorFlow: A Review,” Journal of Educational and Behavioral Statistics 45, no. 2

(2020): 227–48, https://doi.org/10.3102/1076998619872761 (accessed Jul. 2, 2021).

74 https://www.gartner.com/en/documents/3947472/magic-quadrant-for-cloud-infrastructure-as-a-service-wor.
75 E. Zheng, U. Tian, and K. Ji, “Market Guide for Cloud Infrastructure and Platform Services, China (ID: G00727371),” Gartner, March 24, 2021,

https://www.gartner.com/document/3999770?ref=solrAll&refval=291587213 (accessed Jul. 23, 2021).

76 “Alibaba Group Holding Limited (BABA) Stock Price, News, Quote & History,” Yahoo! Finance, https://finance.yahoo.com/quote/BABA/

(accessed Jul. 15, 2021).

77 Lulu Yilun Chen, “Alibaba,” Bloomberg, November 19, 2017, https://www.bloomberg.com/quicktake/alibaba (accessed Jul. 15, 2021).

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to the Chinese government, Alibaba Cloud struggled to expand and offer its full capabilities, which were
available in China, internationally.78 Similar to US cloud competitors, Alibaba viewed the cloud as the future of
the company and continued to invest heavily in expanding availability zones in Asia Pacific areas to compete
on the international stage.79

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Others

Legacy tech giants IBM and Oracle also compete in the cloud race. Both firms were late to launch their
cloud offerings—IBM in 2013 and Oracle in 2016. Yet their strong brands, historical technical expertise, ability
to attract top talent, and existing customer relationships enabled them to create well-designed cloud products
and capture a decent customer base.80 By 2020, Oracle had a stronger market share presence in SaaS
applications, and IBM was fifth globally in IaaS market share.81 Time will tell how they will adapt and grow
their cloud market shares beyond their niche segment.

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Huawei and Tencent are popular cloud providers in China, but both are significantly behind Alibaba Cloud
and have struggled to expand their international offerings significantly beyond the Asia region. Tencent’s
strategy to grow its international market share is to expand its physical cloud footprint and to partner with other
international tech titans such as IBM and Intel.82 Huawei takes a different approach—it helped establish and
actively contributes to the Cloud Native Computing Foundation, carving out a reputation within the native-
cloud developer community internationally.83 In addition, Huawei led the rollout of 5G globally and offers
services that integrated with its system. Similar to IBM and Oracle, the delay in launching a cloud product and
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dominance of the early hyperscale providers are challenges for Huawei and Tencent in capturing larger global
market share.

Nutanix and VMware, both in California, specialize in virtualization technologies that help organizations
optimize their IT infrastructure. Founded in 2009 and with a growing presence in the hyperconverged
infrastructure and cloud space, Nutanix is considered a challenger in the market. It focuses on serving the public
tC

sector, financial services, and health care industries, with its versatile platform for hybrid infrastructure, cloud-
native applications, and edge computing. VMware, founded in 1998, caters to verticals including financial
services, government, communications, health care, and retail and wholesale. With solutions for hybrid
infrastructure, assured workloads, cloud-native applications, and multi-cloud scenarios, VMware is recognized
as a leader in various facets of the virtualization, cloud management, and data center infrastructure markets.84

Both Nutanix and VMware provide hybrid cloud computing (a mix of public cloud and private data
centers), which offers companies greater control and flexibility in their cloud deployment strategy. In 2023, the
No

landscape of competition in the hybrid cloud model is notably different from that in the public cloud model,
given especially the absence of Google. AWS and Microsoft are still among the leaders in hybrid cloud, while
Tencent and Huawei are among niche players, as they are in the public cloud realm. See Exhibit 6 for a
representation of Gartner’s 2023 Magic Quadrant for the Distributed Hybrid Infrastructure Market.

78 https://www.gartner.com/en/documents/3947472/magic-quadrant-for-cloud-infrastructure-as-a-service-wor.
79 Arjun Kharpal, “Alibaba Expands Cloud Products with Livestream Shopping in Its Battle against Amazon,” CNBC, June 8, 2021,
Do

https://www.cnbc.com/2021/06/08/alibaba-cloud-expands-products-with-livestream-shopping-data-centers.html (accessed Jul. 15, 2021).

80 https://www.gartner.com/en/documents/3947472/magic-quadrant-for-cloud-infrastructure-as-a-service-wor.
81 https://www.businesswire.com/news/home/20210513005338/en/Worldwide-Public-Cloud-Services-Market-Totaled-312-Billion-in-2020-with-

Amazon-Web-Services-and-Microsoft-Vying-for-the-Top-Position-Overall-According-to-IDC.
82 Elles Houweling, “Tencent Unveils New Ultra-Fast Cloud Storage, Plans ‘3D’ Assault on the Cloud,” Verdict, May 11, 2021,

https://www.verdict.co.uk/tencent-unveils-new-ultra-fast-cloud-storage-plans-3d-assault-on-the-cloud/ (accessed Jul. 15, 2021).

83 “Huawei’s IaaS Market Share Ranks No. 2 in China and among the Top 5 in the Global Market,” Huawei Cloud, April 29, 2021,

https://www.huaweicloud.com/intl/en-us/news/20210429103415247.html (accessed Jan. 3, 2023).

84 Raj Bala, Dennis Smith, Kevin Ji, David Wright, and Miguel Angel Borrega, “Magic Quadrant for Cloud Infrastructure and Platform Services,”

Gartner, October 19, 2022, https://www.gartner.com/doc/reprints?id=1-2AOZQAQL&ct=220728&st=sb (accessed Jan. 9, 2023).

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Future of Cloud

As cloud providers continued to invest in new services, a third phase in cloud computing’s evolution is
well on its way: a cloud centered on machine learning. By incorporating AI, cloud providers implement
predictive modeling that allows them to better migrate data to the cloud, plan maintenance for predicted server

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problems, identify a server’s lifespan, and produce more accurate resource utilization forecasts.85 According to
Accenture, this more-efficient cloud operating model could result in 30%–50% cost savings in ongoing run
operations.86 Although in its nascent stage, an intelligent cloud presents cloud providers with an infinite realm
of opportunities to optimize servers and more efficiently scale to demand.

At the same time, a new breakthrough is occurring in cloud: edge computing or cloudlet, in which the
computing power and data storage is closer to the source of data collection (on the “edge” of the internet). The
increased traffic of information traveling to and from the cloud has lengthened response times, which is

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problematic for new technologies like autonomous vehicles (AV). These need computing that is end-to-end
controlled, meaning it involves a closed decision loop that doesn’t require outside input, to enable real-time
control and privacy; and a system that is highly responsive, with response times of tenths of a millisecond.87
Edge computing solves this need through its high bandwidth and low end-to-end latency, meaning minimal
delay from the time the sensor collects data to the time it performs an action based on its analysis of and
response to those data88—perfect for AV, augmented reality, and face recognition. Moreover, cloudlets can
work independently of the larger cloud, making them less vulnerable to cloud outages, and they are often used
op
to do initial analysis before transmitting information to the cloud for more in-depth analysis. For example, Tesla
leverages AWS’s edge and cloud computing services to manage the nearly autonomous capability of its electric
vehicles (EVs). As this space continues to grow, especially with the introduction of 5G, the future of cloud may
hinge on expectations of faster speed.

Partly Cloudy?
tC

Milind Govekar of Gartner said, “there is no business strategy without a cloud strategy.”89 While it’s true
that some businesses would have struggled or failed without the help of this technology, Govekar’s statement
doesn’t ring true for all technology leaders or for all businesses. Jerome Labat, chief technology officer of
Cerner, argues that the mentality to look solely to cloud computing as a solution to every IT question may be
miscalculated, suggesting that “technology leaders should think hard about whether the cloud is the right fit for
each use case.”90 Even though the advantages of cloud computing are compelling and attractive to many
No

businesses, integrating these services can be quite costly, time consuming, and challenging in terms of setup,
and they are often complicated to manage.91 It is up to each manager to assess the value of implementing cloud
computing at their business.

85 Ricardo Bianchini, Marcus Fontoura, Eli Cortez, Anand Bonde, Alexandre Muzio, Ana-Maria Constantin, Thomas Moscibroda, Gabriel Magalhaes,

Girish Bablani, and Mark Russinovich, “Toward ML-Centric Cloud Platforms,” Communications of the ACM 63, no. 2 (February 2020): 50–59,
https://dl.acm.org/doi/abs/10.1145/3364684 (accessed Jan. 3, 2023).
Do

86 https://www.accenture.com/us-en/insights/cloud-migration-index.
87 Mahadev Satyanarayanan, “The Emergence of Edge Computing,” Computer 50, no. 1 (January 2017): 30–39, https://doi.org/10.1109/MC.2017.9

(accessed Jan. 3, 2023).

88 “What Is End-to-End Latency,” IGI Global, https://www.igi-global.com/dictionary/end-to-end-latency/71994 (accessed Jul. 29, 2021).
89 Laurence Goasduff, “Gartner Says Cloud Will Be the Centerpiece of New Digital Experiences,” Gartner press release, November 10, 2021,

https://www.gartner.com/en/newsroom/press-releases/2021-11-10-gartner-says-cloud-will-be-the-centerpiece-of-new-digital-experiences (accessed
Dec. 1, 2022).
90 Jerome Labat, “Why Cloud Isn’t Always the Best Answer: 4 Myths and Misconceptions,” TechBeacon, https://techbeacon.com/enterprise-it/why-

cloud-isnt-always-best-answer-4-myths-misconceptions (accessed Dec. 1, 2022).

91 https://techbeacon.com/enterprise-it/why-cloud-isnt-always-best-answer-4-myths-misconceptions.

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Exhibit 1
Cloud Computing
Comparison of Different Cloud Application Services

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yo
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tC

Data source: Created by authors using “Cloud Computing: IaaS vs. PaaS vs. SaaS,” Red Hat, https://www.redhat.com/en/topics/cloud-
computing/iaas-vs-paas-vs-saas (accessed Jul. 29, 2021), and author analysis.
No
Do

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[email protected] or 617.783.7860
 Page 15 UV8649

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Exhibit 2
Cloud Computing
Data Center Infrastructure Market (data for Q2 2019 to Q2 2020)

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yo
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tC

Source: Created by authors based on Mark Haranas, “Why Public Cloud Data Center Spending Is at
an All-Time High,” CRN, September 10, 2020, https://www.crn.com/news/data-center/why-public-
cloud-data-center-spending-is-at-an-all-time-high (accessed Aug. 4, 2021).
No
Do

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[email protected] or 617.783.7860
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Exhibit 3
Cloud Computing
Comparison of Top Cloud Providers

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Amazon Web Services Microsoft Azure Google Cloud Platform

Year established 2006 2008 2008

Availability zones 96 76 (available or coming 76

soon)

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Geographic regions 30 35 (available or coming 35
soon)

Market share 34% (Iaas, PaaS, hosted 21% (Iaas, PaaS, hosted 11% (Iaas, PaaS, hosted
(Q3 2022) private cloud) private cloud) private cloud)

Big clients General Electric Daikin Industries, Ltd., T- Verizon Communications

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Company, Johnson & Mobile USA, Inc., Inc., Lumen Technologies
Johnson, Hitachi, Ltd., Conagra Brands, Inc., (CenturyLink), LinkedIn
Sony Group Corporation, Bayer Corporation, Corporation, SAP SE, Meta
The Walt Disney Fujifilm, Sanofi, Platforms, Inc. (Facebook),
Company, Unilever N.V. Volkswagen AG Yahoo! Inc., Marriott
International, Inc.
tC

General on-demand 4vCPU/16 GiB memory 4vCPU/ 16GB memory 4vCPU/16 GB memory =
pricing for instance = $0.1664/hour. = $0.166/hour. $0.1509/hour.
deployment
(in northern Virginia,
January 2023)

Note: vCPU = virtual central processing unit; GB = gigabyte; GiB = gibityte (1 GB = 0.93 GiB).
No

Data sources: Created by authors compiled from “About AWS,” https://aws.amazon.com/about-aws/; “AWS Global Infrastructure,” Amazon
Web Services, https://aws.amazon.com/about-aws/global-infrastructure/; Mary Jo Foley, “Microsoft Launched Azure 10 Years Ago and Lots
(But Not Everything) Has Changed,” ZDNET, October 26, 2018, https://www.zdnet.com/article/microsoft-launched-azure-10-years-ago-
and-lots-but-not-everything-has-changed/; “Azure Geographies,” Azure, https://azure.microsoft.com/en-us/explore/global-
infrastructure/geographies/; “Cloud Locations,” Google Cloud, https://cloud.google.com/about/locations; TechRepublic Staff, “Google
Cloud Platform: A Cheat Sheet,” TechRepublic, February 19, 2021, https://www.techrepublic.com/article/google-cloud-platform-the-smart-
persons-guide/; Amy Sarah John, “In Q3 2022, Amazon, Microsoft, and Google Own 66% Share of the Cloud Infrastructure Market, Finds
Synergy Research,” Wire19, October 31, 2022, https://wire19.com/amazon-microsoft-and-google-cloud-infrastructure-market/; Ty Haqqi, “15
Biggest Companies That Use AWS,” Yahoo!, January, 23, 2021, https://www.yahoo.com/video/15-biggest-companies-aws-011011152.html;
“Customer Stories,” Microsoft, https://customers.microsoft.com/en-
us/search?sq=&ff=story_product_categories%26%3ECloud%20Platform%26%26story_organization_size%26%3ECorporate%20%2810%2
C000%2B%20employees%29&p=8&so=story_publish_date%20desc; Dave Tracey, “Who’s Using Google Cloud Platform (GCP)? [2020]”
Do

Contino, March 12, 2020, https://www.contino.io/insights/whos-using-google-cloud-platform; “Amazon EC2 On-Demand Pricing,” Amazon
Web Services, https://aws.amazon.com/ec2/pricing/on-demand/; “Pricing Calculator,” Azure, https://azure.microsoft.com/en-
us/pricing/calculator/; “Google Cloud Pricing Calculator,” Google Cloud, https://cloud.google.com/products/calculator#id=6c509568-
43da-4bb4-9b7b-48f69d68dd4c (all accessed Jan. 9, 2023).

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 Page 17 UV8649

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Exhibit 4
Cloud Computing
Cloud Provider Competitive Positioning (IaaS, PaaS, and hosted private cloud; Q1 2021)

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yo
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Source: Created by authors using “Amazon and Microsoft Maintain Their Grip on the Market but Others Are Also Growing Rapidly,”
Synergy Research Group, April 29, 2021, https://www.srgresearch.com/articles/amazon-and-microsoft-maintain-their-grip-market-
others-are-also-growing-rapidly (accessed Jul. 29, 2021).
No
Do

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[email protected] or 617.783.7860
 Page 18 UV8649

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Exhibit 5
Cloud Computing
A Recreation of 2022 Gartner, Inc.’s Magic Quadrant
for Cloud Infrastructure and Platform Services Market Position

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yo
op
tC
No

Source: Created by authors using Raj Bala, Dennis Smith, Kevin Ji, David Wright, and Miguel Angel
Borrega, “Magic Quadrant for Cloud Infrastructure & Platform Services,” Gartner, October 19, 2022,
https://www.gartner.com/doc/reprints?id=1-2AOZQAQL&ct=220728&st=sb (accessed Jan. 9, 2023).
Do

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[email protected] or 617.783.7860
 Page 19 UV8649

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Exhibit 6
Cloud Computing
A Recreation of 2023 Gartner, Inc.’s Magic Quadrant
for Distributed Hybrid Infrastructure Market Position

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yo
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tC
No

Source: Created by authors using Julia Palmer, Tony Harvey, Michael Warrilow, David Wright, Jeffrey
Hewitt, “Magic Quadrant for Distributed Hybrid Infrastructure,” Gartner, September 27, 2023,
https://www.gartner.com/document/4787931?toggle=1&refval=380841381&ref=solrAll (accessed
Oct. 10, 2023).
Do

This document is authorized for educator review use only by Eshika Aggarwal, Indian Institute of Management - Jammu until Jan 2025. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860