The Coming Cloud War Isn’t About Market Share

At least once a quarter we are bombarded with press releases about how public cloud providers are catching up to, or overtaking, perennial leader Amazon Web Services in terms of market share or quarterly revenue trends. A good example is this recent story which, in my opinion, took the routine to a new level of bluster.

Perhaps even more tiring: as a reliable reaction, these PR stunts trigger blog posts and social media threads that explain how some cloud providers are structuring their business reporting in a way that ensures a favourable comparison (for example, rolling up numbers from cloud-based business applications into cloud numbers).

To paraphrase a famous hockey adage by Wayne Gretzky, the focus on these variables is like skating to where the puck used to be. I will argue that where the puck is soon to be, and will remain for the foreseeable future, is a very different place: in a world that experiences an alarming rise in the extremity of climate events and resulting geopolitical unrest, and in which every summer is the coolest we’ll ever have going forward, the lens of investors, governments and buyers is already shifting.

Rows of solar panels and a partially cloudy sky

In an earlier post, “Is Cloud Good For Humans? The Ethical Angle”, I spoke to Anne Currie, Tech Ethicist at consulting firm Container Solutions, and emerging hard-science fiction author. In that post, Currie shared tangible, bottom-up actions that every developer and IT person could take to reduce the carbon footprint of their work on the cloud. I went back to Currie to speak about the top-down: on a strategic level, how are the big three public clouds approaching this issue as a competitive factor?

A new competitive paradigm

As a cloud buyer looking for a strategic partner, carbon intensity and corporate climate governance are set to become dominant factors, more so than the short-term financial performance metrics we track today. A good example of how institutional investors in other industries are reforming their hypotheses is the Transition Pathway Initiative (TPI) tool, which aims to provide a multi-dimensional analysis of climate posture for some of the largest polluters in the world. This shift to climate-oriented investment criteria by some of the largest investors in the world is already transforming corporate policy in many sectors, and Cloud is unlikely to be an exception.

Why are investors interested in how their assets act on (or ignore) climate change? For a number of reasons. First, companies who care about their broader eco-systems, tend to financially outperform those who don’t. Second, investors are risk-focused, and climate change poses an increasingly complex risk. Companies that don’t manage these risks—plan for them, discuss them at board level, carry out scenario planning, set targets—might be setting themselves up for long-term failure. These risks also have a physical dimension in examples such as flooded factories (or data centers), regulation risk imposed by expected carbon taxes, and litigation risk (as seen recently in the wave of lawsuits filedagainst corporations and governments for failing to act on climate change). 

This is not theoretical: investors with trillions of dollars in assets under management are already pressing companies to commit to ambitious targets, and the TPI (backed by supporters with $21 trillion of assets under management) measures companies on those indicators, informing investor engagement, divestment, shareholder resolutions, and voting.

Three clouds, three strategies

Why is this important? It is because the entire world (a sum of its actors) needs to be Net-Zero emission by 2050, in order to have a chance of not exceeding a temperature increase of over 1.5 degrees Celsius above pre-industrial levels, which would trigger tipping points in terms of extreme weather events, and send the economy and geopolitics into a spiral that would dwarf anything we are seeing with COVID-19. 

Given the high probability and impact of the risk of not meeting Paris Agreement targets, investors and buyers are focusing on the quality of climate and carbon management within a company—both in terms of actual emissions reductions, and the governance around them. Governance includes issues like level of board involvement and oversight, executive remuneration for good ‘carbon performance’, target setting, and of course transparency around these activities.

In a paper published by Currie and Paul Johnston in 2018, and updated last February, the authors map the three clouds against the three strategies, in the following way:

  • Strictly in terms of data center operational emissions, Google is actively carbon-neutral (which means it offsets any emissions by buying carbon credits). In September, CEO Sundar Pichai announced that Google will be eliminating its carbon emissions legacy by buying historical carbon credits, and aiming for 100% clean electricity every hour of every day by 2030.
  • Microsoft, who have also been carbon-neutral for a while, have set a company-wide (not just Azure) goal of being carbon-negative by 2030, stating that “while the world will need to reach net zero, those of us who can afford to move faster and go further should do so”. Even more so than Google, Microsoft is setting a precedent for taking responsibility for historical emissions, which is a critical element in corporate accountability.
  • Amazon’s Climate Pledge is a commitment to run its operations on 100% renewable energy by 2025 and be carbon-zero by 2040, a decade later than its competitors targets (carbon zero means no offsetting will be involved). Currie believes that in particular due to their early leadership position, some of AWS’s major regions are relatively higher on emissions, for example US-East (due to the energy mix there). AWS has been public about Oregon, GovCloud-U.S. West), Frankfurt, Canada-Central and Ireland as its green nominated regions on its Sustainability webpage, and has been making some visible investments in clean energy.

In terms of transparency and governance, Google and Microsoft typically get higher marks from industry analysts and journalists than Amazon, according to Currie. Both companies use renewable energy credits(RECs), which are a sort of token representing a utility’s renewable energy generation, and are easy to measure and track publicly. Amazon has been so far slower in its efforts at transparency, although it has started to publish its strategy to drive carbon out on its public website.

This is a partial analysis, and readers are encouraged to do further research. It is important to note that a narrower focus on AWS itself will enable a more accurate comparison than the current view of physical supply chain-heavy retail giant Amazon vs. software companies Microsoft and Google. In addition, most of the focus is around data center operations, and not on other important factors such as the carbon impact of building them, the companies’ push in other areas of sustainable solutions (from electric cars to meat and dairy substitutes), or even what the company footprint is in relation to its office-based workforce and travel.

New ways to lead

If we’ve learned anything about AWS since its mythical beginnings in 2006, it is that it moves with remarkable agility even as it grows much bigger, and constantly iterates. Climate change mitigation has not been an area of significant transparency, compared to visible innovation in other areas. As a software-driven infrastructure business, and possibly the most agile part of Amazon, AWS has the potential to change this story. The company is famously customer-obsessed, and as the frame of competition in any industry (let alone an energy-consuming juggernaut such as cloud computing) shifts to meet climate crisis challenges, we can hope that AWS will increase competitive pressure in this area, too, for all our benefit.

As cloud buyers, many CIOs already feel the pressure from regulators, investors and customers, and are taking steps that are impacting cloud providers. In addition, DevOps culture and developer empowerment, coupled with the increasing share of late-Millenials and Gen-Z in the workforce, are accelerating the pressure for ethical behavior from internal stakeholders. These changes are visible in companies as young as Snyk, which recently migrated a key service from another supplier to an AWS carbon-neutral region, or as large and established as the Financial Times. Speaking to Currie, Rob Godfrey, senior architect at the FT shared that the organization plans to have moved entirely to the cloud by the end of 2020. He added, “we hope that around 75% of our infrastructure will be in what AWS have been calling their clean regions, but we would like to see that percentage even higher in future.”

As COVID-19 provides us a preview into the complexities we might face with climate change, cloud buyers would be wise to shift their focus from short-term, biased revenue comparisons to areas that could have a lasting impact on the risk or success of their suppliers, and to demand an investment in both an accelerated green transition and in the governance required to track it.

(Originally posted on

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