Industry giants' next battleground is in the clouds

In a battle for dominance in cloud computing, Google is taking on Microsoft and Amazon in their own backyard.

Google is doubling its office space near Seattle, just kilometres from the Amazon and Microsoft campuses, and stepping up the hiring of engineers and others who work on cloud technology.

It is part of Google's dive into a business known as "cloud services" - renting to other businesses access to its enormous data storage and computing power, accessible by the internet.

In cloud computing, dozens or even thousands of computer servers are joined to create a giant machine capable of handling many tasks at once, from storing data to running websites and mobile apps and tackling complicated analytical problems.

Software developers, big companies and governments rent these services to run their operations, often at a fraction of the cost of having their own machines.

Amazon Web Services is by far the leader in this field. Amazon expects this business eventually to be as big as its retail operation.

AWS is followed by Microsoft's Windows Azure and offerings from other companies including Rackspace, Verizon, IBM and Hewlett-Packard.

Google says the cloud business is a new source of profit and a way to improve the internet by providing other companies access to its sophisticated computing services.

Analysts say it is also a strategy to lure developers and businesses to use Google products.

Cloud services have become vital to many companies, says James Staten, an analyst at Forrester, because they are crucial to other businesses, such as mobile apps and online video and music.

Most of the apps that run on Google Android phones, for instance, are built using Amazon's cloud, and Google would like to wrest back control. Microsoft, Amazon and Google are all competing to host online video, a booming business that relies on cloud services.

"Almost every major consultancy supports Amazon; almost every advertising agency runs on Amazon; if I need to hire 10 people tomorrow to help me build my application, it's super easy to find people who have Amazon experience," Mr Staten says.

Google plans a major recruiting effort to increase its engineering staff, adding to the already fierce competition among tech companies for talented developers.

"We're not the first in this rodeo, but we have the history of Google," says Brian Goldfarb, the company's leader of cloud platform marketing. "We have the best data centres on the planet. You can't really give engineers a bigger, badder thing to work on."

Over time, Google, Amazon and Microsoft have built world-class clouds to run their businesses.

Analysts say Amazon earned $US800 million from its cloud services last year. "It is replacing the corporate data centre," says Adam Selipsky, who runs AWS.

Google's cloud offerings were tied to other Google services but, to reach a broader market, it has followed Amazon's lead by offering a cloud platform that works with a broader range of services.

People who have used Google's cloud business say it is not expensive and capable but lacks some features of AWS. Google has said its cloud services will cost about 50 per cent less than competing products.

If Google wants a price war, Mr Selipsky says, Amazon is ready.