Cloud Economics: Microsoft, Google & Amazon

By Sridhar Vembu, Zoho CEO, Zoho |  On-demand Software, Amazon, Azure

Yesterday Microsoft launched its Azure cloud platform, so it is time for another spreadsheet. To properly compare Microsoft, Google and Amazon, I am using the gross profit (instead of revenue) and net profit numbers. Gross profit is, in some sense, the real revenue of a company after paying its outside suppliers; gross profit is what is available to pay its employees, pay the rent, and so on. For a software company, the cost of goods sold is close to zero, so most of the revenue is gross profit. But for a retailer, as much as 70-80% of revenue goes to its suppliers, so gross profit is the better measure of the economic productivity the company achieves. The numbers below use rough annualized estimates based on the most recent quarter.

Company Annual Gross Profit in USD Net Profit in Billions USD Employee Count Gross Profit/Employee in Thousands USD Net Profit/Employee in Thousands USD
Microsoft 48 17.68 91000 527 194
Google 12 5 20123 596 248
Amazon 4 0.8 20500 195 39

Do you notice the dramatic difference? Google and Microsoft are in another planet altogether compared to Amazon. Google has practically the same headcount as Amazon, yet drives three times the gross profit. The numbers really illustrate Amazon’s competitive strategy in cloud computing; to quote Nick Carr:

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