Amazon and Google are admitting that Microsoft may be right about one thing (AMZN, GOOG, MSFT)
Amazon
The Microsoft Azure cloud computing platform may still be a distant second-place contender to Amazon's $10 billion Amazon Web Services juggernaut, but Microsoft has one edge: It can sell to its existing base of large enterprise customers.
The key is Microsoft's Windows Server business, which lets those customers take their existing data center investments and easily bridge them to Azure — where they can get access to functionally unlimited supercomputing power just by punching in their credit card number.
Now, Amazon and the third-place Google Cloud Platform are working on their own software for companies' data centers, reports The Information's Kevin McLaughlin, in a bid to win more of those big enterprise deals for themselves.
This is the exact opposite of the public cloud model that made Amazon and Google's businesses. It acknowledges that not all customers want to move everything into the cloud. Some customers, because of regulatory and data governance concerns, simply can't allow certain information and processes to live outside their own data centers.
For Google, this isn't such a huge shock: Back in July 2015, Google joined up with OpenStack, an initiative to build a free and open source alternative to Amazon Web Services, optimized to run in the data center.
Since then, Google has collaborated with OpenStack startup Mirantis to improve the technology. And new Google cloud boss Diane Greene has made it clear that the company will do whatever it takes to be competitive.
Amazon
But for Amazon, this is kind of a big deal. As recently as 2015, Amazon CTO Werner Vogels says that the company sees the so-called "hybrid cloud" — the industry term for the model where some customer data resides in the data center, and some on big "public cloud" platforms like Amazon — as a mere stopgap trend as companies increasingly outsource their entire IT infrastructure to AWS.
And while Amazon Web Services offers some hybrid cloud-enabling products, like the AWS Storage Gateway, they've historically mostly focused on making it easier to move data into the Amazon cloud — rather than software that helps you manage it yourself.
If Amazon itself is tasking engineers with building out on-premises software, it means that it's starting to take that market seriously. It's no surprise, with Microsoft rapidly building out both its technology and its sales strategy to try to close its revenue gap with Amazon Web Services.
Amazon
Meanwhile, Microsoft is working on accelerating its own hybrid cloud strategy with the 2017 launch of Azure Stack, which lets customers install a virtual carbon copy of the Microsoft Azure cloud to certain pre-certified servers, further simplifying the integration between the two.
Google and Amazon did not immediately respond to a request for comment.
NOW WATCH: Google is trying to kill one of the most annoying things about the internet