When Salesforce.com (NYSE:CRM) first started out, it was wedded to Oracle (NYSE:ORCL) for database technology. It used Oracle cloud when that was starting out; there are constant rumors about Oracle buying Salesforce and the two companies still partner when that's in their mutual interest.
But Salesforce has been steadily moving beyond Oracle's orbit. It has agreements to store data on Microsoft (NASDAQ:MSFT) Azure. And now it's making Amazon (NASDAQ:AMZN) Web Services its "preferred partner" as it expands internationally.
Amazon isn't just big. Amazon is all over the place. It has 12 "regions" or data processing centers, and plans to add many more. This is becoming vital as governments demand that data on their citizens be held within their countries, even though keeping all your data eggs in one basket eliminates the redundancy Internet technology can provide.
Redundancy would have been a good thing for Salesforce earlier this month, when outages in northern Virginia caused data loss, and CEO Marc Benioff had to personally take to Twitter (NYSE:TWTR) and apologize. Making lemonade from those lemons drew praise from Salesforce's analysts.
People who follow the cloud market are always busy trying to claim that the cloud world is highly competitive, but in one way it's not competitive at all. No company can offer more geographical and processing reach to cloud customers than AWS. To keep growing at 27% per year, Salesforce has to increase its international presence, and thus a deal with Amazon was inevitable. By scaling its operations now among different cloud providers, Salesforce also limits its own capital needs and gives itself flexibility in future dealings with them.
One name missing from all this is Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), which has become far more aggressive in seeking cloud customers under Diane Greene. The two companies were quite close nearly a decade ago, and there are always silly stories claiming Alphabet might buy Salesforce, but they haven't deepened their relationship now in nearly a decade. When that happens, and it seems reasonable to assume it will, that's another win for Salesforce, not Google, because it gives the company yet another provider it can play off the others.
The point is that in addition to becoming a dominant cloud software provider to business, Salesforce is becoming the kind of customer that can demand more from its cloud suppliers, and arbitrage them successfully.
If a technology company can get a lead and expand upon it, it becomes ever harder to catch as it scales. That's the root of the 90-9-1 idea, 90% of a market's profits going to a market leader, 9% to the second-place company and 1% to everyone else.
In cloud services, Amazon is the market leader. In cloud applications, it's Salesforce.
Disclosure: I am/we are long AMZN, MSFT, GOOGL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.