Both companies were founded out of their founders’ garages. Both companies make their home in the larger Seattle area. Both companies are leading the cloud computing market.
Right now, Amazon and Microsoft are leading some of the most promising efforts to develop the next big computing platforms.
To understand why, one need only look at another similarity: Both companies were completely steamrolled out of the smartphone market by Apple and Google.
Those business setbacks, along with each companies’ growing cloud capabilities, have set the stage for an exciting storyline.
Between Amazon Web Services and Microsoft Azure, the two companies have dominance over cloud computing — a super-hot market that Microsoft CEO Satya Nadella recently said was likely to be “larger than any market we’ve ever participated in.”
And it’s that cloud expertise that makes Amazon and Microsoft the companies best poised to think beyond the smartphone and come up with the next big thing.
Lose to win
In some important ways, Apple and Google are victims of their own smartphone success.
The iPhone, for example, is an unqualified hit and the main driver of Apple’s immense revenues, but it also means that the company is limited when it comes to making bold bets for fear of cannibalising their own cash cow.
Even the Apple Watch is more of an extension of the iPhone platform than it is a brand-new paradigm for technology. Which is fine, it just wasn’t as exciting as lots of people hoped.
And Google has to toe a very fine line as it works to create what could be the successor to Android, which would fuse together its smartphone and Chromebook operating systems.
Amazon and Microsoft, no doubt, would love to have those problems. But, alas, the Amazon Fire Phone and Microsoft Windows phone businesses have both been relegated to the junkheap of history. Microsoft notably hangs on to the illusion of Windows phone’s success, but even big-time Microsoft fans know it’s over.
Which, it turns out, is actually really great for customers who are already perfectly happy with their existing smartphones. With no expectations or pretensions around the smartphone platform, Amazon and Microsoft can go completely nuts.
Holographic headset? Sure! Laptop/tablet hybrids? Great. A completely voice-based operating system? Why not! With their deep pockets, Microsoft and Amazon have everything to gain by investing in science-fictional technologies.
And with the smartphone race settled, there’s nothing to lose, no business they risk cannibalising, no users they risk alienating. They can try anything and everything in search of the next big hit.
The Fire Phone may have flopped, but the Echo has become a favourite of Silicon Valley’s finest, and soon, perhaps the world. Experts like Apple cofounder Steve Wozniak even say Echo is the next great platform.
And, as The Verge’s Lauren Goode points out, the Echo probably would never have happened had the Fire Phone been a hit. Sometimes you have to lose to win.
Cloud is king
All of this new hardware from Microsoft and Amazon would be useless if you couldn’t do anything with them.
The thing about the Amazon Echo is that all of the increasingly crazy stuff it can do — from searching the web to ordering an Uber to reading you your Kindle books aloud — relies on a lot of complex stuff going on behind the scenes.
Same for Microsoft’s coolest stuff: The HoloLens relies on hardware for its holograms, but Windows 10’s Cortana virtual assistant will serve as one of its major interface methods, letting you talk to access apps and services.
Cloud computing, the model where startups and large enterprises alike rent practically unlimited supercomputing capacity from hyperefficient data centres run by the tech giants, is already a hugely growing market.
And Amazon Web Services and Microsoft Azure, already the #1 and #2 players in the market by a country mile, use their own clouds to power stuff like Echo, Cortana, and more.
It’s a big part of why, in a feature-for-feature comparison, Amazon Echo beats Apple Siri every time — Apple doesn’t really have any particular specialty in the cloud, while Amazon just keeps making its cloud infrastructure bigger and smarter.
More importantly, the cloud allows for a certain kind of consistency. Microsoft CEO Satya Nadella calls this a “consistency of experiences” — Cortana learns your preferences across every single device, while services like OneDrive store your files so you have them everywhere.
It means that with every new experiment, and every bold try at a new computing standard, Microsoft and Amazon get smarter. They get to know you and your preferences better, even as the system itself learns from how you use it. It means things get iteratively better, and every shot gets closer to the mark.
Google has a lot of the same cloud savvy, so the company has the potential to excel here as well as it creates more of its own consumer hardware devices.
As customers flock to Microsoft Azure or Amazon Web Services, too, it gives them more capital to reinvest in the platform. That investment manifests as more features and more capacity, which then attracts more customers. Amazon calls this “the virtuous cycle.”
So while competitors like Google have the cloud piece, and Apple has the devices piece, Amazon and Microsoft have the freedom they need to just experiment, right alongside the computing power to make for things that are really, truly different. Everybody wins!
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.