- According to analysts, Amazon Web Services, Microsoft and Google Cloud are unlikely to have much impact on their business due to the current economic downturn caused by corona viruses.
- According to analysts, more and more companies are demanding that their employees work remotely to limit the spread of the virus. This could offer cloud providers more options.
- According to analysts, Google Cloud and Microsoft in particular benefit from work productivity applications that can help companies work remotely, while AWS offers more name recognition.
- You can find more stories on the Business Insider homepage.
The corona virus crisis is devastating stock markets as companies close or find out how to work remotely. According to experts, cloud providers, especially Amazon Web Services, Microsoft and Google Cloud, should be relatively safe from these turmoil.
It is noteworthy that the cloud was not nearly as close to the mainstream as it is today during the last financial crisis, so the current economic downturn due to the corona virus could set the precedent for how cloud providers develop during the turmoil.
According to Alex Zukin, general manager of RBC Capital Markets, cloud providers are "some of the most robust businesses" in the technology industry.
Many companies are already running some of their key apps behind the scenes in the cloud, where they can simply buy more computing capacity when they need it, rather than having to set up more data centers themselves, as Zukin notes.
This is good news for mega-clouds like AWS, who are likely to both keep their existing customers and find new ones, considering cloud computing as a way to save data center and server costs in the turmoil. While the entire tech industry could slow down, cloud providers will likely be fine.
"Ultimately, the trend toward cloud computing from the corona virus will not slow down dramatically," David Jones, senior analyst at Edward Jones, told Business Insider. "Companies are increasingly trying to move applications from their data centers to the cloud model."
Cloud providers are well positioned for remote work
A direct impact of the coronavirus crisis is that more and more companies, including giants such as Apple and Amazon, are forced to have most of their employees work remotely.
For analysts from AWS, Microsoft and Google Cloud, this is a net positive. Analysts say these newly removed employees rely on tools like Zoom, Asana, and Slack to stay organized and work with their team remotely. Again, these tools are at least partially hosted on AWS, which means that they will benefit from the increased demand.
This momentum will increase cloud providers' sales as more employees stay at home, says Jeb Su, principal analyst at Atherton Technology Research.
"People are using their infrastructure more," Su told Business Insider. "Obviously, this would result in higher revenue and more use … The impact of the pandemic is that cloud providers' infrastructure will be used more."
According to Sanjeev Mohan, Research Vice President at Gartner, cloud companies are "already on the right track" for customers who work remotely.
"In terms of customer use, cloud providers are already very well positioned," said Mohan. "They strengthen their value proposition, which is to provide value-added services in the cloud, as opposed to people who rely on internal networks and hardware. This whole thing with the corona virus can cause a bigger push into the cloud."
Mohan also says local governments around the world impose restrictions on movement to control the spread of the corona virus, which could mean that companies lose access to their physical data centers. For customers who are not constrained by industry-specific rules such as HIPAA healthcare regulations, this could spark the spark for these companies to take a step.
"This virus is the catalyst," said Mohan. "Those who weren't constrained by strict regulations were trying to find out (locally) whether we're going to the cloud or not are now going to go to the cloud."
Google is vulnerable
Generally, analysts say all three big clouds would be under similar pressure due to an economic downturn, but point out some differences in how they are likely to deal with the situation.
For example, Microsoft has more traditional enterprise customers with contracts that can take many years. This protects against the possibility of customers deducting their expenses. According to Ray Wang, founder and principal analyst of Constellation Research, Microsoft has the advantage of being able to pack its other software, such as Microsoft Office and Teams, with services from the Azure cloud so that one can support the other.
Similarly, Google has the G Suite that allows businesses to collaborate and do more work remotely. With schools around the world being canceled and classes being moved online, the situation can support Google's business as more and more students use Google's G Suite and video conferencing software, Wang said.
Martin Wolf, president and founder of consulting firm Martinwolf, predicts that Google Cloud will be less affected as it is still small enough to lose the least compared to AWS and Microsoft.
On the other hand, AWS has more and more customers, which means that it is potentially more exposed to economic impacts, says Wolf. If customers in high-risk sectors like travel and entertainment are pulling their cloud spending out of the corona virus crisis, this could be bad news for Amazon's bottom line.
"Depending on their customer profile, some industries are at high risk," said Wolf.
Since AWS has been in the cloud business for the longest time, it will have an advantage in name recognition when it comes to attracting new customers, which Google Cloud in particular does not do, says Heger.
Under CEO Thomas Kurian, Google Cloud has improved its sales game by hiring more sales people and selling them to certain industries. However, it still has to prove itself in order to get a larger place at the table, says Heger. In addition, the challenge is to win deals when sellers can't travel and can't meet customers in person.
"It Wouldn't Affect the Cloud"
In general, however, cloud business is a stronghold that could bolster any company's finances no matter what else happens, says Andrew Bartels, Forrester vice president and principal analyst. For example, a slowdown in consumer spending could negatively impact Amazon's retail business, but is unlikely to affect AWS.
The same applies to Microsoft and Google, with the possibility that the hardware business of Microsoft and the advertising business of Google are impaired. But Microsoft Azure and Google Cloud are unlikely to see any impact on their business, says Bartels.
"Even if they were hit by the recession, it would have no impact on the cloud," Bartels told Business Insider.
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