Cloud computing drives massive growth for big U.S. tech firms

SAN FRANCISCO (Reuters) – Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O), Alphabet Corp’s (GOOGL.O) Google and Intel Corp (INTC.O) are all putting their chips on the cloud computing business, and it is booming.

FILE PHOTO – A sign marks the Microsoft office in Cambridge, Massachusetts, U.S. January 25, 2017. REUTERS/Brian Snyder/File Photo

All four companies posted stellar quarterly earnings on Thursday, showing the strength of the shift in corporate computing away from company-owned data centers and to the cloud.

Microsoft’s Azure business nearly doubled, with year-over-year growth of 90 percent. The company does not break out revenue figures for Azure, but research firm Canalys estimates it generated $ 2 billion for Microsoft.

“The move to the cloud was one we felt Microsoft could always benefit from, and they’re showing us that they can,” said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.

Highlighting the quarter for Microsoft was a deal securing retailer Costco (COST.O) as an Azure customer. That came just two months after the close of Amazon’s acquisition of grocery chain Whole Foods, which has heightened unease among retail and e-commerce companies about working with Amazon, said Ed Anderson, an analyst with Gartner.

Tim Green, analyst with the Motley Fool, said Amazon could find it needs to make changes at some point at Amazon Web services. “Spinning off AWS at some point down the road might become necessary to prevent an exodus of customers,” he said.

Amazon Web Services is still delivering far more revenue than any of its peers. For the quarter, AWS raked in nearly $ 4.6 billion — a year-over-year increase of 42 percent. AWS may have missed out on Costco, but the company secured deals with Hulu, Toyota Racing Development, and most notably, General Electric.

Google Cloud Platform landed deals with the likes of department store retailer Kohl’s and payments processor PayPal. Like Microsoft, Alphabet does not break out revenue for Google Cloud Platform, but Canalys estimates the business generated $ 870 million in the quarter, up 76 percent year-over-year.

FILE PHOTO – The logo of Amazon is seen at the company logistics center in Lauwin-Planque, northern France, February 20, 2017. REUTERS/Pascal Rossignol/File Photo

Google Chief Executive Officer Sundar Pichai said Google Cloud Platform is a top-three priority for the company. He said Google plans to continue expanding its cloud sales force.

Canalys estimates the cloud computing market at $ 14.4 billion for the third quarter of 2017, up 43 percent from a year prior. Amazon holds 31.8 percent of the market, followed by Microsoft at 13.9 percent and Google with 6 percent, according to Canalys’ estimates.

The “cloud market will keep growing faster than most of the traditional information technology segment, as the market is still in the developing stage,” said Daniel Liu, research analyst with Canalys.

FILE PHOTO – The Google logo is pictured atop an office building in Irvine, California, U.S. August 7, 2017. REUTERS/Mike Blake/File Photo

Reflecting the overall growth of the market was the strong performance by Intel, which sells processors and chips to cloud vendors. In July, Intel launched its new Xeon Scalable Processors, which drove 7 percent year-to-year growth for the company’s data center group.

The big three cloud vendors also benefit from the decision by many enterprises to build their applications using more than one cloud vendor. Retailers Home Depot Inc (HD.N) and Target Corp (TGT.N), for example, told Reuters they use a combination of cloud providers.

“Our philosophy here is to be cloud agnostic, as much as we can,” said Stephen Holmes, a spokesman for Home Depot, which uses both Azure and Google Cloud Platform.

Some analysts expect cloud services growth to slow over time as competition increases.

Amazon, for instance, has said that price cuts and new products with lower costs on average are a core part of its cloud business. Additionally, Amazon Web Services saw usage growth outpacing that of revenue growth, said Amazon Chief Financial Officer Brian Olsavsky.

“Going forward, cloud services will become more of a commodity, and the prices will quickly compress,” said Adam Sarhan, CEO of 50 Park Investments, an investment advisory service. “For now though, it’s a great business with plenty of room for all to grow.”

Reporting by Salvador Rodriguez; Additional reporting by Jeffrey Dastin and Paresh Dave; Editing by Leslie Adler; Editing by Jonathan Weber

Our Standards:The Thomson Reuters Trust Principles.

Tech

PMI Surveys Show U.K. Economy Struggling With Slow Growth And Rising Prices

The pace of UK economic growth edged down to the joint-lowest for just over a year in September, according to PMI survey data. However, price pressures intensified to suggest that policymakers may continue to talk up rate hike prospects.

Economy on course for modest Q3 growth

The latest survey data indicated that the economy continued to expand at a modest pace in September, but that growth momentum continued to be gradually eroded. The ‘all-sector’ IHS Markit/CIPS PMI slipped further from April’s recent high, down from 53.7 in August to 53.6 in September. The current reading matched February’s recent low to therefore signal the joint-weakest expansion of output since August of last year.

The survey data put the economy on course for another subdued 0.3% expansion in the third quarter, matching the performance seen in the first half of the year, albeit with momentum being gradually lost over the course of the quarter.

With the exception of the slowdown seen in the months surrounding last year’s referendum, the third quarter performance was the worst since the first quarter of 2013.

Slower manufacturing output growth and the first drop in construction activity for 13 months were accompanied by on-going weak service sector growth in September. Although output of the service sector grew at a slightly faster rate than August, the pace of expansion for the third quarter as a whole was the worst recorded for a year.

Within services, consumer-facing companies have reported especially weak growth in recent months, leaving reliance on financial services, transport and business services as the main drivers.

The slow erosion of growth may continue in coming months. Inflows of new business in September were the lowest for 13 months, suggesting demand growth has waned again. Business optimism about the year ahead meanwhile slipped lower again in September, running at a level historically consistent with business activity growth waning further in coming months and the economy slowing towards stagnation at best.

Hiring slowdown amid rising costs

The September surveys also signalled some pull-back in hiring. While August had seen the largest rise in employment since October 2015, September’s jobs growth was the weakest since June reflecting slower payroll gains in both manufacturing and services.

Slower employment growth in part reflected difficulties finding suitable staff, but was also a symptom of a reticence to hire amid worries about future demand and the need to offset higher input costs. Average input cost inflation accelerated in all three sectors, rising as a whole at the steepest rate since February.

Although not matching the highs seen earlier in the year, the rate of input price inflation remained elevated by historical standards, attributed to higher import costs due to sterling’s weakness as well as rising global commodity prices, notably for oil.

Higher costs were often passed on to customers, leading to the largest monthly rise in average prices charged for goods and services since April and suggesting consumer price inflation could rise above 3% in coming months.

Policymakers pulled in different directions

The rise in price pressures will pour further fuel on expectations that the Bank of England will soon follow-up on its increasingly hawkish rhetoric and hike interest rates. However, the decision is likely to be a difficult one, as the waning of the all-sector PMI in September pushes the surveys slightly further into territory that would normally be associated with the central bank loosening rather than tightening policy.

Tech

Three Keys To Driving Business Growth

Business development is crucial for any new start-up, without it, your business will struggle to survive let alone thrive.

When it comes to developing your business, and let’s be clear about what we mean by this, we mean increasing your revenue.

And simplistically speaking there are only three ways that you can do that, and these are: sell more, sell to more, and sell for more.

Too often we overcomplicate things, but in terms of revenue growth, these are the only options and the clearer that we can see them the easier it is to address them, and all of your efforts should be directed to these three tasks.

Your business should have strategies for all three of these opportunities because if you don’t then, you are missing opportunities and potentially leaving the business on the table for your competitors to profit from.

Sell More

The easiest way to grow your business is to sell more products or services to your existing customers. Your existing customers already have a relationship with you, they probably already know you, like you and trust you, so it should be fairly easy to sell additional items to them.

Some studies have shown that it costs seven times as much to add new customers than it does to sell to existing customers.
That means that there are bigger profits to be made in selling additional products and services to existing customers as you have already borne the customer acquisition cost previously.

So what other products and services can you offer to your existing customers. These might not even be services that you produce; these could be complimentary services where you take a small percentage from a partner. Look at airlines who look to offer additional services like car hire, hotels, etc., etc. as they look to maximise the revenue from their customers.

You also need to have customer satisfaction high on your agenda, because for every customer you lose it will cost you significantly to replace them.

You need to have strategies for increasing your revenue per customer.

Sell to More

This is probably the area that most businesses focus on, attracting new customers and increasing market share and penetration. You need more customers if you want to dominate your market and also to drive efficiencies and economies of scale which can help increase profits. But you need to be smart about how you go about this, and to look to keep your customer acquisition costs as low as possible.

One of the cheapest ways to attract new customers id through referrals from existing customers. If your existing customers are happy with your products and services how can you encourage them to become your advocates and to recommend you?

How can you set up win-win arrangements so that both of you benefit?

Remember, if it costs seven times more to acquire a new client than it does to sell to an existing client when clients are recommended to you much of this cost is saved and could be used to reward those who recommended you.

Affiliate programs take a similar approach, where you let someone else bear the cost of finding you new customers for a percentage of the sale.

There are many options for finding new customers, and you need to have strategies that best fit your business model, and also optimize your profitability.

Sell for More

I am always amazed at the number of clients I work with that undervalue the services that they offer. There are often several reasons for this: they lack confidence and so underprice; they don’t understand what the market can bear, or they don’t see the real value in what they are offering.

This last one can come from too much familiarity, which can lead to a form of contempt for our own goods or services which then leads us to lower the price.

Price increase is probably one of the easiest ways to increase revenue, but it does come with risk. Raise the prices too high, and we could lose business and customers.

But the same is true when our prices are too low, if you do not see the value in what you offer, then why should someone else.

One client, I worked with, we doubled her pricing. As she rightly predicted it lost her some customers, but it also attracted new customers who were both able and willing to pay the higher price, and she actually increased overall demand and revenue.

If you have a quality product then you need to sell it for premium prices, if you seel it at budget prices, it will be deemed a budget product.

There are only three ways to increase revenue, sell more to your existing customers, sell your products and services to more people, and to sell them for more money. By having strategies for all three of these will allow you to maximise your business potential.

Ignoring one or more of these just leaves more money for your competitors to take.

Tech