Given the lucrative economics, competition in the red-hot cloud-computing market among many of the space's most powerful incumbents will probably remain fierce for a long time. Attempts to redefine the fabric of computing from leading companies such as Amazon.com and Google befit their sky-high ambitions. In one recent example, Google unveiled a new cloud-computing product in its ongoing attempt to steal market share from Amazon.
Supercomputing showdown Last week, Google announced the public release of its pre-emptible virtual machines, or VMs, a cloud-based supercomputing product that offers a number of benefits both to Google and its cloud-computing customers. At their most basic, VMs allow customers to affordably run advanced supercomputing tasks at steep discounts to current alternatives. However, the discount comes with a catch, and that's why the term "pre-emptible" deserves some attention.
According to the terms of service, Google reserves the right to abruptly seize a user's supercomputing resources as its own business needs arise, making the service ideal for customers needing affordable supercomputing resources for projects with flexible schedules. In its product announcement press release, Google discussed how researchers from the Broad Institute leveraged the product to perform what once would have been three decades of cancer research calculations in the space of a single afternoon, at a total cost of only $4,000. With discounts as steep as 70% of traditional, non-pre-emptible supercomputing resources, the product promises to be useful across a whole host of applications. Google's new product also helps further its efforts to narrow Amazon's lead in cloud-computing resources in general.
Chasing AmazonAlthough analysts and investors often discuss it as a homogenous space, the global cloud-computing market consists of a number of diverse subsectors. So while it's true that Amazon largely dominates the cloud market, that's also an oversimplification of the space's complexity. The financial scope of the cloud supercomputing space in particular is unclear, but Amazon appears to enjoy a sizable technological or capacity lead over challengers such as Google.
Google's press release frames pre-emptive VMs as providing a service for "whether you need 50 cores of 50,000," referring to the amount of raw processing power required for a task. And while the 50,000 core capacity isn't the absolute upward limit of its capabilities -- the Broad Institute experiment used a reported 51,200 cores -- it suggests that Google still lags Amazon in terms of its supercomputing capacity. According to The New York Times, Amazon has run supercomputing tasks with as many as 150,000 dedicated cores with its Amazon EC2 Spot Instances product.
The market opportunity for Google and Amazon in the market for cloud supercomputing, often also referred to as High Performance Computing (HPC) appears worth the effort and competition. Researcher IDC estimates the global market for HPC will grow from $20 billion in 2013 to over $29 billion in 2019.
It's worth noting here, though, that cloud supercomputing services are a relatively new faction within the space. Whereas supercomputing power was once relegated only to companies that could afford the multimillion-dollar investments in high-power servers, cloud-based services like Google's and Amazon's dramatically reduce the costs associated with analyzing massive sets of data. So although the multi-year growth estimate above implies only 5.5%average annual growth for the industry, it's almost certain that Amazon and Google are stealing huge amounts of market share because of their structural cost advantages. So while the above +$20 billion annual figure refers to cloud and non-cloud supercomputing, the overall market opportunity is certainly an exciting one for the players at the epicenter of this paradigm shift.
Importantly, the market for cloud supercomputing likely remains only a small subset of the overall cloud computing market. For instance, research firm IDC states 2015 public cloud revenues will tally at roughly $70 billion. Beyond just revenue characteristics,many people assumed Amazon would run AWS to breakeven, given its well-documented fondness for competing on price to maximize market share. However, the surprisingly profitable 17% operating margins AWS reported earlier this year probably only increased the competition among Amazon, Google, and Microsoft. So while we remain in the early innings of this tech paradigm shift, Google's recent challenge to Amazon appears to be yet another example of how this heightened competition manifests itself in the marketplace.
The article Google Continues to Challenge Amazon in This Important Cloud Computing Market originally appeared on Fool.com.
Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns and recommends Amazon.com, Google (A shares), and Google (C shares). The Motley Fool owns shares of MSFT. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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