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Complete the Case Analysis Template ?

Case Analysis Template[footnoteRef:1] [1: For general case preparation strategies, see also: http://plato.acadiau.ca/courses/Busi/IntroBus/CASEMETHOD.html.]

Current Situation

Step 1. The Facts

WHO is the decision maker?

WHAT is the task to be done (decision to make, problem to solve, opportunity to seize)?

WHY has the issue arisen now? What is its significance to the organization?

WHEN does the decision maker have to decide, resolve, act or dispose of the issue? What is the urgency to the situation?

Step 2. In Depth Analysis

Analyze the case situation using the core model at right. Consider the following sorts of questions (the exact questions will vary somewhat depending on the case).

1. What business problem are we trying to solve?

2. Why is that problem important to the business?

3. How does the nature of the current IT contribute to or alleviate the problem?

4. How does the current organization (structure, people, culture etc.) contribute to or alleviate the problem?

5. How did we get here? Critically assess the factors that have contributed to our current situation?

Criteria

Use your analysis of the current situation to identify the relevant criteria.

Criteria

Meaning/Measurement

Why Selected?

Analysis of Alternatives

What options are given in the case?

Are there additional options you think need to be considered?

Performance Against Criteria

Options

1

2

3

1

2

3

Decision

Which option do you think is best? Why?

How does this proposed solution address the business problem identified in your analysis of the current situation?

Implementation

How will you go about implementing your decision (who will do what, when, and how)?

Short Term (= ________ days/wks/mths/yrs)

Medium Term (= _____ days/wks/mths/yrs)

Long Term (= ________ days/wks/mths/yrs)

What are the major risks associated with your decision?

What steps will you take to avoid or mitigate those risks?

IN1658

Case Study

Cloud Wars Go Global:
How Amazon, Microsoft, Google and Alibaba Compete in
Web Services

This case study was written by Jason Davis, Associate Professor of Entrepreneurship and Family
Enterprise, and Anne Yang, Research Associate, both at INSEAD. It is intended to be used as a basis
for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.

To access INSEAD teaching materials, go to https://publishing.insead.edu/

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COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, TRANSLATED,
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03/2020-6577

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?At AWS, we keep a close eye on our competitors, but we are obsessed with our
customers?Many large technology vendors are now trying to build a replica of what
AWS has been building for the last decade.?

Alex Yung, Managing Director of AWS Greater China 1 (May 4, 2019)

“Amazon, Microsoft, and Alibaba all have different playbooks, but Alibaba is playing
the home game in China, which gives them advantages Amazon or Microsoft would
never have.?

Evan Zeng, Senior Research Director, Gartner 2 (May 4, 2019)

1. Introduction

Developed around 2006, cloud computing took off to become one of the IT innovations that defined
the 2010s, transforming the way computers and software interacted and operated. Defined simply,
cloud computing is the delivery of computing services?including servers, storage, databases,
networking, software, analytics, and intelligence?from proprietary data centres over the internet
(?the cloud?) to offer faster innovation, flexible resources, and economies of scale. The global
public cloud market is forecast to grow from US$182.4 billion in 2018 to US$331.2 billion in 2022,
a compound annual growth rate of 12.6%.3

By 2020, all the world?s leading digital businesses ? from technology content companies like Netflix
and Spotify, to innovative start-ups like Rovio and Zynga, to Fortune 500 companies like Colgate-
Palmolive and Coca-Cola ? had their IT operations running on the cloud. However, many other
companies had yet to take advantage. Only one fifth of enterprise applications ran on the cloud ?
the result of legacy IT systems, slow corporate buy-in, and a lack of understanding of the many
advantages it offered –

– First, it lowers the cost of deploying and maintaining IT systems by reducing or eliminating
the need for businesses to purchase fixed equipment and build their own data centres.

– Second, these systems are easy to scale as the enterprise grows its ERP, CRM, and other
programmes based on their needs. The cloud provider often passes on the economies of
scale to customers in the form of lower volume-based pricing. Savings on software,
hardware, facilities and maintenance significantly reduce the total cost of ownership (TCO)
of IT infrastructure.

– Third, hosting systems, programmes and apps on the cloud provides data-recovery
safeguards in an emergency. Disasters can damage equipment and shut down critical IT
functions, but cloud systems are safeguarded and thus can support recovery efforts.

– Cloud computing increases mobility and collaboration by enabling team members to work
remotely. Although physically apart, they can collaborate seamlessly and receive updates
to work-streams in real-time (e.g., when people have to work from home as a result of
COVID-19).

1 https://asia.nikkei.com/Business/Companies/Amazon-prepares-to-battle-with-Alibaba-in-Asia-s-Cloud
2 https://asia.nikkei.com/Business/Companies/Amazon-prepares-to-battle-with-Alibaba-in-Asia-s-Cloud
3 https://www.cio.com/article/3397054/the-state-of-Cloud-computing-in-southeast-asia.html

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– Finally, the cloud gives access to the latest technologies and greater security at a lower
initial cost as most apps and programmes come with flexible, subscription-based options.
Beyond the cost savings, this enables companies to build apps, build solutions, and do
analysis that would otherwise be impossible.

Cloud computing had thus evolved into an ?enabler? ? a building-block of the digital economy. In
addition to supplying the infrastructure for on-demand access to corporate data storage and
computing power, it was the basis of new ?ecosystems? that enabled the digital transformation of
industries and the creation of new products and services.

One-stop, plug-and-play cloud service providers such as Amazon Web Services (AWS), Google
Cloud Platform (GCP) and Microsoft Azure appealed strongly to organizations that had
product/service offerings with pay-per-use, could be scaled up or down based on usage, and were
characterised by resiliency and self-service. To stay ahead of the competition, service providers
continuously added functionalities to their cloud offerings that supported new digital-first business
models, such as real-time streaming and data-warehousing capabilities.

2. The Race to the Cloud

Cloud computing took off with the creation of AWS and the introduction of its Elastic Compute
Cloud (EC2) in 2006. Microsoft launched Microsoft Azure in 2010. Google Cloud Platform (GCP)
was released in 2013. AWS, the early winner, dominated market share since the birth of the
industry (see Figure 1).

Figure 1: Comparison of Growth of Top 3 Players

Source: Jefferies, company reports

Despite the benefits, many businesses, particularly in traditional industries, had yet to make the
leap. A McKinsey survey revealed a gap between IT leaders that had migrated most of their

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systems/processes and ?the rest? that had migrated less than 5%.4 Meanwhile the race continued
to heat up, with AWS, Microsoft Azure, Google Cloud Platform and Alibaba Cloud jostling for a
bigger piece of the pie (see Figure 2).

Figure 2: Global Cloud Infrastructure Spending and Growth by Company

Cloud service
provider

Full year 2019
(in billions)

Full year 2019 market
share (%)

Annual growth (%)

Amazon Web
Services

35 32 36

Microsoft Azure 18 17 64
Google Cloud 6 6 88
Alibaba Cloud 5 5 64
Others 43 40 23

Source: Canalys

The adoption of cloud computing by corporations was most prominent in North America,
accounting for half of the global market, followed by Western Europe. The top players were
targeting Asia Pacific as it had the highest growth projections ? the region?s spending on public
cloud services and infrastructure was valued at $26.0 billion in 2019, an increase of 47.1% over
2018.5 Public clouds were expected to grow exponentially, with spending in Asia Pacific forecasted
to reach US$76.1 billion in 2023, a five-year CAGR of 33.9% (figure does not include private
clouds used exclusively by one business located either on-site or hosted by a third-party service
provider).

To meet data sovereignty requirements and deliver superior performance to Asia-Pacific clients,
all the top providers (AWS, Azure, GCP and Alibaba Cloud) were building more data centres,
including in emerging markets such as Thailand and Indonesia. While Amazon dominated globally,
Alibaba Cloud was a strong number two in the region, largely thanks to its domestic market
(China). Providers were eyeing South East Asia, where the market was estimated to reach
US$40.3 billion by 2025, given the surge in demand from small- and medium-sized enterprises
(see Figure 3).

4 https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights

/Creating%20value%20with%20the%20Cloud%20compendium/Creating-value-with-the-Cloud.ashx
5 https://www.idc.com/getdoc.jsp?containerId=prAP45431219

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Figure 3: Cloud-Enabling Technology Market ? Growth Rates by Region (2019-2024)

Source: Mordor Intelligence

3. Key Players in Cloud Computing ? “Big Tech”

The decade 2010-20 had seen the rapid rise of “Big Tech”, of which the four providers featured
here are only a subset. The ?Big Five? (Apple, Amazon, Alphabet, Microsoft and Facebook)
collectively generated a staggering US$801.5 billion in 2018, with average margins of 17.3%.6
The top three players, Amazon, Alphabet (Google) and Microsoft, were strongly positioned, while
Apple and Facebook remain focused on consumers. China?s Alibaba and Tencent had moved into
the top ten most valuable publicly traded companies globally.

The convergence of trends in technology, social media, globalization and deregulation had
propelled ?Big Tech? into the biggest companies in the world, overtaking former titans like Exxon,
Berkshire Hathaway and General Electric (see Figure 4).

6 https://www.visualcapitalist.com/how-tech-giants-make-billions/

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Figure 4: Largest Companies by Market Cap (2019)

Source: https://www.visualcapitalist.com/a-visual-history-of-the-largest-companies-by-market-cap-1999-today/

However, web services were only part of the businesses of the four cloud providers featured here.
The dominance of Big Tech was the result of broader dynamics. The rise of Google, Facebook,
Amazon, Alibaba and Tencent has changed the way we lead our daily lives, using a fundamentally
different business model in which massive amounts of user data are collected and analysed by
these platforms, then monetized. With the ubiquity of social media, platforms and e-commerce
apps, Big Tech companies derive insights from everything bought, sold, said or done on
smartphones. The internet is essentially a giant machine for sharing, processing and predicting
information, made possible by cloud computing as the basis of ecosystems that collect, integrate
and analyse massive amounts of user data.

While Amazon?s online store still generated most of its revenue, its non-retail segments including
AWS and subscription services reported higher growth in Q2 2019 (see Figure 5). Founder Jeff
Bezos had built an empire from investments and acquisitions that included groceries (Whole
Foods), gaming (Twitch.tv) and fashion (zappos.com).

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Copyright ? INSEAD 6

Figure 5: Amazon Revenue and Segments, Q2 2018 vs Q2 2019

Source: https://www.statista.com/chart/15917/amazon-revenue-by-segment/

Although cloud computing had its roots in early efforts by companies such as Salesforce.com to
offer software as a service (SaaS), the first cloud computing hosts did not emerge in earnest until
2006. AWS dominated cloud computing throughout the next decade, while Google, Microsoft and
Alibaba emerged as challengers. Microsoft Azure surged with the introduction of tools for the
?hybrid cloud? ? systems that allow companies to move some computing to the cloud but keep
control of highly confidential data.7

Amazon Web Services (AWS)

Global leader AWS was the first to gain a solid foothold. With the most complete and technically
advanced system, it expanded aggressively. It led in infrastructure-as-as-service, moving to
expand the stack to include the Internet of things (IoT), artificial intelligence (AI), augmented reality
(AR) and data analytics.

Amazon?s cloud was the backbone of Amazon?s architecture, powering everything from its smart
assistant Alexa to predictions of shoppers online and its massive e-commerce site. AWS boasted
an impressive list of customers including Netflix, LinkedIn, Facebook, Expedia, Cars.com, the
BBC, Baidu and even NASA, which streamed images received from its space rover Curiosity,
through the AWS cloud.

By 2019, only half of Amazon?s revenue came from e-commerce, and a third came from providing
a retail platform for others. AWS reported profits of $9.2 billion, while profits from ‘everything else’

7 https://www.wsj.com/articles/microsoft-steps-up-push-to-dominate-hottest-segment-of-the-Cloud-11572876001

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were $5.3 billion.8 In 2019, AWS reported revenues of $35 billion, a 37% increase over 2018.
Despite its dominance in the $107 billion cloud market, its rivals were catching up. AWS grew by
34% in 4Q 2019, reflecting a downward trend that started in 2018.9

Microsoft Azure

Launched more than two years after AWS, Microsoft Azure had been playing catch-up ever since.
Built using Microsoft?s own digital software, the number two in cloud computing was popular with
multinational corporations that used MS software like Windows and Office. Its commercial cloud
offering included a range of MS products from Office 365, to Azure and LinkedIn services. Its
Azure stack of clouds was combined with a data centre, differentiating it from its competitors. The
cloud unit actively forged synergies to drive corporate sales of its servers and enterprise software,
homing in on industry verticals in healthcare, retail and financial services. Companies like Dell,
British Heart Foundation, Heineken, eBay, Samsung, SMRT (Singapore?s main transport provider)
and DBS Bank were among Microsoft Azure?s customers.

Microsoft targeted retailers that tended to avoid AWS out of a perceived conflict in the retail sector,
such as Walgreens, ASOS and Bemol (a Brazilian retail powerhouse). CEO Satya Nadella
switched strategy from the internet and mobile to focus on the cloud. Its subsequent rise to a
trillion-dollar company leveraged its experience of selling to firms, which drove large gains from
cloud computing services. Microsoft?s ?Intelligent Cloud? hub recorded revenues of $10.8 billion in
Q4 201910 and grew by 62% in the last three months of 2019, faster than any other provider.11

Google Cloud Platform

Having neither Amazon?s retail muscle nor Microsoft?s enterprise sales pedigree, Google Cloud
Platform (GCP), while as technically advanced, had grown less swiftly than its rivals. Its consumer-
centric legacy had held it back, but it was making up ground. Google?s focus on Machine Learning
and AI had gained traction among banks and financial services firms. G Suite had positioned it in
direct competition with Microsoft?s Office 365. A partnership with SAP tied its AI and Machine
Learning to SAP?s pervasive system. Analysts predicted that Google would gain share over time,
with companies choosing GCP over AWS and Azure for its lower pricing and higher speed of up
to 10tbps.

With Spotify, Apple, Lush Cosmetics and Evernote part of its impressive clientele, GCP emerged
as a strong competitor. Its huge data, collected over 17 years, had the potential to provide
incomparable insights. The platform went gone from generating $500 million in 2016 to $8.9 billion
in 2019, a 53% increase on 2018.12 While it had a long way to go to catch up in terms of revenue,
it was putting up a good fight ? 88% growth in 2019.

8 https://twitter.com/benedictevans/status/1223275886599921666/photo/1
9 https://qz.com/1798530/can-google-or-microsoft-beat-aws-in-the-Cloud-wars/
10 https://www.marketwatch.com/story/microsoft-earnings-trounce-expectations-as-quarterly-profit-tops-10-billion-2019-

10-23
11 https://qz.com/1798530/can-google-or-microsoft-beat-aws-in-the-Cloud-wars/
12 https://www.geekwire.com/2020/google-discloses-Cloud-revenue-first-time-heres-compares-amazon-microsoft/

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Alibaba Cloud

Alibaba Cloud, also known as Aliyun (?yun? means cloud in Chinese) was established as a
subsidiary of the Alibaba Group in 2009. Like AWS, it grew out of Alibaba?s e-commerce
ecosystem to providing cloud computing services to other online businesses. While lagging the
other three global players, it was catching up fast and was the leading cloud provider in China. By
virtue of its Chinese customer base, it had expanded globally, along with Chinese firms like
XD.com and Lazada. It had also made headway with MNCs like SAP, K?archer and Ford,
particularly in Europe and Asia. Big airlines including Cathy Pacific and Air Asia, as well as hotel
chains like IHG, were among Alibaba Cloud?s clients.

Like Amazon (perhaps even more so), Alibaba could leverage the e-commerce world ? which was
its bread and butter business. Alibaba Cloud leveraged sales synergies with an installed base of
e-commerce vendors. On 17 February 2020, Alibaba Cloud exceeded US$1.5 billion in revenue,
up 62% year-on-year.13 On 11.11 (Singles Day), the robustness of its cloud infrastructure was
demonstrated by handling more than $40 billion in transactions and 544,000 orders per second at
its peak ? without a hitch. However, with the COVID-19 epidemic, speed of growth would be
hampered in 2020.

4. Global vs. Localization Strategies

All the cloud companies emphasized that their focus lay with the customer, not the competition.
The power dynamics between AWS, Azure, GCP and Alibaba were slowly shifting. The adoption
of services from multiple providers ? known as a ?multi-cloud strategy?, while more costly, allowed
companies to avoid dependency on any one provider, increase reliability, and enjoy the best
services that each could offer.

To date the focus had been on cloud providers, but this could change as governments started to
mandate data localization laws and support national champions. The European Union had passed
regulations which had pushed companies to implement data storage in local servers and require
encryption of products and services. Its underlying goal was to break the dominance of the US
and China with a project named Gaia-X, using existing cloud infrastructure and Europe-specific
applications and technologies, albeit a similar European cloud initiative had previously failed.

Alibaba faced additional challenges as a Chinese company: non-Chinese companies were wary
of trusting it with a mission-critical workload, an issue exacerbated by the rhetoric of international
trade and politics.

The various cloud players had adopted different strategies of ?localizing products? versus keeping
them ?fully global?. While Alibaba touted its localization in various markets, AWS had largely
succeeded with its global clouds coupled with local customer sales and relationships. It boasted
over 165 fully featured services and claims, over 40 of which were not available anywhere else.
Its broad range of applications included computer storage, databases, networking, analytics,
Machine Learning and AI, IoT, security, and application development, deployment and

13 https://www.Cloudcomputing-news.net/news/2020/feb/17/alibaba-Cloud-breaks-15bn-revenues-amid-hope-

ecommerce-migration-encouragement/

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management. Additional functionality included powerful Graphics Processing Unit (GPU)
instances for Machine Learning workloads and more database services than its competitors.

Amazon and Microsoft had built their cloud businesses in ?traditional? enterprise-sales fashion,
acquiring clients through key decision-makers in companies, taking a ?top-down? approach.
Google and Alibaba took a ?bottom-up? approach, whereby IT teams advocated their products and
offerings. This was reflected in their presence worldwide. Google Cloud Platform had more than
100 points-of-presence in 135 countries and intended to focus on the Asia Pacific region with long-
term investments to support its growing business there. Alibaba grew exponentially in China but
remained China-centric until 2015, when it set up an international headquarters in Singapore and
earmarked US$1 billion in investment to expand its data centre footprint, build up its partner
ecosystem, and develop new cloud services.

From the technology perspective, the top three players, particularly AWS, still had the edge over
Alibaba in terms of breadth and diversity of offering. The cloud is synergistic, so while Google
seemed comparatively constrained, Microsoft and Alibaba continued to drive incremental sales on
top of existing products and services.

5. Enabling Digital Entrepreneurship on the Cloud

Cloud service providers played an important role in levelling the playing field, allowing
organizations of all sizes to embrace digital transformation and new business models to compete
in the fast-evolving technology landscape. With innovation a key determinant of success in the
digital age, the cloud opened the field to digital entrepreneurs seeking to test their ideas efficiently
and cost-effectively. In addition to providing cloud computing services to large corporations and
SMEs, it gave anyone with a great idea the tools to innovate, grow, and compete with bigger
players. Enabling unprecedented speed and agility, it let start-ups experiment initially and scale
up quickly when necessary.

When digital-innovation apps take off in a phenomenal fashion, the infrastructure is often unable
to keep pace with demand and the company may fail as a result. The shift from office-based work
to working on-the-move had created huge demand for cloud-based technology and big data
requirements ? companies relied on data to serve consumers, mining their habits, spending
patterns, whereabouts etc. Cloud data centres enabled instant adjustment to internet traffic
volume and data requirements, as witnessed on Alibaba?s Singles Day operations.

By transitioning functions to the cloud, companies could focus on their core business. In addition
to various apps, storage, email and database servers, the cloud offered servers for gaming and
mobile apps. The benefits of rapid scalability and elasticity, which enabled systems to grow in step
with changing business demands while minimizing costs, were particularly strong for companies
specialised in digital innovation. Anyone (from entrepreneurs to large MNCs) could leverage cloud
technology to execute strategies in emerging technologies like AI, IoT, cognitive computing and
Machine Learning (ML). In a way, the cloud players had democratized these technologies ?
accessible to everyone. Each had a similar strategy of opening their cloud offerings to partners to
encourage the formation of a genuine ecosystem. Most partners were small vendors, although
SAP was notable in Google’s ecosystem. Customers could use the software and services in a
plug-and-play way (see Figure 6).

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Figure 6: Ecosystems Offered by Top Cloud Players

Source: https://www.visualcapitalist.com/interactive-major-tech-acquisitions/

Cloud computing technology enabled companies in developing countries such as Indonesia and
Nigeria to ?leapfrog? over earlier technologies and compete with bigger companies locally ? and
in some cases globally. Unlike the past, when the initial investment in hardware and software was
expensive and rigid, start-ups and midsize organizations could leverage cloud computing to spur
innovation and compete, because they had access to the same technologies as much larger
organizations without the burden of investment in expensive data centre resources and highly
skilled IT personnel.

Cloud computing also enabled a mobile app revolution. Unlike native apps, developed specifically
for iOS or Android, cloud apps could be launched on both platforms at the same time, thus lowering
development and maintenance costs. Cloud apps did not have to be downloaded and inst

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