Only those with money can do what they want: Who will be the final winner in the cloud computing market?

When it comes to the hot cloud computing market, Amazon, Microsoft, Google and IBM are the four heavyweight players that must be mentioned. In order to gain an advantage in the newly emerging cloud computing market, the above companies are undoubtedly adopting a low-price strategy, which can be seen from the news that cloud computing services are competing to reduce prices from time to time in the industry.

At the same time, providing cloud computing services also requires the construction and deployment of a large number of infrastructure such as servers and storage. For example, in the first quarter of this year, Google became the one with the largest expenditure and the fastest growth in expenditure, with capital expenditure reaching US$2.3 billion, almost doubling year-on-year. The growth of this number is mainly due to the construction of data centers. The company's capital expenditure for the whole year of 2013 grew even faster: from US$3.3 billion in 2012 to US$7.4 billion; Microsoft's capital expenditure in the first three quarters of this fiscal year ending in March was about US$4.2 billion, up 69%, mainly used to invest in meeting the needs of corporate customers who are moving more software online (cloud computing). In order to support Microsoft CEO Nadella's cloud-first strategy, Microsoft's capital expenditure is expected to grow in the next few years. As for Amazon and IBM, their performance losses and lower future profit margins are also due to their increasing investment in cloud computing. For this reason, the industry says that the current cloud computing market is a game that only wealthy companies can afford to play. However, since cloud computing represents the development trend of the future industry and the market space is huge, whoever can hold on to the end may be the final winner.

Speaking of investment, the measure of a company's future sustainable investment capacity is undoubtedly the company's free cash flow and return on invested capital. According to relevant statistics, in 2013, Amazon's free cash flow exceeded 2 billion US dollars, which was equivalent to 2011 and better than 2012. Amazon's return on invested capital in 2013 was 2.2%, higher than 1% in 2012. In 2011, the figure was 6.8%, significantly lower than 15.4% in 2010. In the third quarter of this year, Amazon's return on invested capital was negative 2.2%.

In contrast, Microsoft, currently ranked second in the cloud computing market, had a free cash flow of $26.75 billion in the fiscal year 2014 ending June 30. It should be noted that in the past five years, Microsoft's annual cash flow has ranged from $22.1 billion to $29 billion (free cash flow is quite stable). In terms of return on invested capital, Microsoft's return on invested capital was 19% in 2014, down from 22.6% in 2013. It is worth mentioning that Microsoft's return on invested capital was over 33% in both 2011 and 2010. As for Google, which ranks third, its free cash flow reached $11.3 billion in 2013, down from $13.35 billion in 2012. In the third quarter ending September, its free cash flow was $8.44 billion. In terms of return on invested capital, its return on invested capital was 14% in 2013, but in the third quarter of this year, Google's return on invested capital was only 2.8%. As for IBM, its free cash flow last year was around $16 billion, and its return on invested capital was around 15%. Judging from these two indicators, Microsoft ranks first, followed by IBM, Google and Amazon.

If the above means the sustainable investment capacity of the big players competing in the cloud computing market in the future, then the current price war in the cloud computing market and its ranking determine the profitability of these big players in the cloud computing market (mainly market share and revenue) to some extent. According to RBC Capital's quantitative analysis of the main indicators of cloud computing services, in terms of the price of medium-sized cloud computing services consisting of six major applications involved in cloud computing services, such as BI, collaborative applications, disaster recovery, enterprise We applications, and enterprise portal applications (three price ranges from low to high), IBM ranked first in 5 items (lowest price), Amazon ranked in 3 items, Google ranked in 1 item, and Microsoft did not have any cloud services with the lowest price. In terms of large-scale cloud computing services, Amazon and IBM both ranked first in 3 items, Google ranked in 2 items, and Microsoft ranked in 1 item. From this comparison, it is not difficult to see that Amazon and IBM provide the lowest service prices in the cloud computing market as a whole, followed by Google and Microsoft. Judging from the current ranking of the cloud computing market, Amazon ranks first, Microsoft second, Google third, and IBM fourth (just a comparison of these four companies). In addition, various manufacturers are currently competing for market share in cloud computing by price. It can be said that Google and Microsoft still have room to continue to lower prices in the future (compared with Amazon and IBM), and may even surpass IBM and Amazon.

If we consider the free cash flow and return on invested capital of each party (which directly affects sustainable investment and the ability to cut prices and engage in price wars) mentioned above, we can see that Microsoft has the most room for growth in the future cloud computing market and is likely to eventually take the top spot, while IBM and Google will be evenly matched in terms of their free cash flow and return on invested capital, which are much higher than Amazon's. This is because IBM's prices for cloud services are generally lower than Google's, and Google still has room to cut prices to compete with IBM for the market, but its free cash flow and return on invested capital are lower than IBM's, which makes Google hesitate to compete with IBM in the future cloud computing market. As for Amazon, although it currently ranks first in the cloud computing market, this is achieved based on its low-price strategy compared to its main competitors. Considering that Amazon has the lowest free cash flow and return on invested capital, its ability to continue to cut prices and maintain competitiveness in the future is the most variable. Of course, it also depends on how Amazon's investors view Amazon's almost suicidal way of grabbing the market.

To sum up, from the perspective of pure commercial competition, although many companies have entered the cloud computing market, the cloud computing market is undoubtedly a game for wealthy companies (at least from the current stage of development), so who will be the final winner depends more on who has more sustainable investment and the ability to obtain market effects.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.