- [Narrator] IBM, Google, Microsoft,
all are making big bets
on cloud computing.
That's for good reason.
Research firm Gartner forecasts
cloud computing revenues
to exceed $260 billion dollars in 2020.
For years Amazon's AWS led the market.
But, that lead is starting to
slip as other firms make moves
to bolster their cloud
computing offerings.
In October, Microsoft
surprised onlookers when it won
the U.S. military's JEDI cloud contract.
It could be worth $10 billion
dollars over 10 years.
Some in Washington expect
Amazon to appeal this decision.
In July, IBM spent $34 billion
dollars to acquire RedHat
and boost it's cloud business.
So, why are tech firms going
to battle for cloud services?
To understand, you've
got to know the basics.
- Well, and like any market that grows
it's strong because it
offers a value proposition
to people that they find attractive,
and so they shift their spending.
- [Narrator] Cloud computing at it's core,
is about changing the way
businesses manage data.
Everything done online;
shopping, video, texts,
it all takes data.
The data is processed in behind
the scenes computers called servers.
Managing that equipment takes
time, energy, and money.
When a business moves to the cloud
it's really just outsourcing.
In other words, tech firms like Amazon
handle some IT services
so businesses can focus
on what they do best.
Outsourcing IT can generate savings.
For example, Bank of America
adopted hybrid cloud computing
and that reduced annual costs
by $2.1 billion dollars.
Start-ups who uses a
cloud provider won't have
to spend as much on a custom data center.
They can use resources from a third party.
In-house IT has to maintain
enough server space
to account for peak demand.
That can mean that your company
has a bigger data center
than it needs on a consistent basis.
Instead, cloud computing lets companies
pool their resources.
The companies use as
many servers as they need
and only pay for what they consume.
Companies that use the
cloud can benefit from
the remote management of data
in places like Ashburn, Virginia.
Amazon, IBM, and others host
some of their data centers
in less populated areas like this.
Both energy and land can be cheaper here
than say, a city center.
That's why you see groups like Facebook
and the NSA opening data
centers in small towns in Utah.
There's potential for lower costs,
the views aren't bad, either.
Cloud computing is tougher for
some businesses than others.
In the years after the launch of AWS,
businesses like Netflix, Lyft,
and Slack launched products
with intense IT demands.
They were a natural fit
for cloud computing.
Some companies who are moving
to the cloud today are bigger,
and are in more regulated industries
like health and finance.
They're companies like J.P. Morgan
which operates under strict standards
from regulators like FINRA.
In 2017, Dana Deasy was the
chief information officer.
At the time, he moved portions of
the financial giant's data to the cloud.
His next task will be
even more formidable,
do the same for the Defense Department.
- So, I've mentioned we have a need
for an enterprise cloud,
so we have massive compute
capability where we can start
to store our data in a more common way
and make it accessible.
- [Narrator] The multi-billion
Joint Enterprise Defense
initiative is supposed to centralize
the military's technology
and reap gains in innovation.
Getting there will mean untangling years
of disparate IT systems.
That will take time, money, and expertise,
which is why Microsoft's
potential win is so significant.
Amazon is no longer the only
big name in cloud computing.
Microsoft's Azure Cloud service
was announced three years
after Amazon AWS took an early lead.
More than a decade has passed
and AWS still dwarfs Azure in revenues.
But, more deals are on the horizon.
- The cloud markets are
still relatively small.
So, their growth rate naturally
is going to be higher.
And we do see that growth
rate coming down slightly
over time as the cloud markets get bigger.
But, the strong growth rates
are still driven by the fact
that people prefer cloud models
over the traditional models
for a lot of their work loads.
- [Narrator] Which is why you see
the largest firms in tech
betting big on the cloud.
Billions of dollars hang in the balance.
