Cloud computing is a new way of selling software. Instead of selling a disc containing software, clouds sell a code to the client and runs software on its own computers where the client has access to it over the Internet. This cut down on hardware that the client needs to buy and maintain. Cloud software vendors at war with each other and that cut into their profit margins. Take human resource software giant Workday who is becoming popular among companies. They run new hiring tasks including setting up benefits, ordering supplies for new hires, and related activities. They have to buy properties and develop data centers in order to house and maintain cloud services on behalf of its clients and that cut into their profits margins and free cash flow making the industry is one of the lowest profitable businesses. This scenario is similar with other cloud providers including travel booking site Sabre, IT service operator ServiceNow, marketing service provider Marketo and the Internet retail behemoth Amazon.com.

However, established brick and mortar companies such as Microsoft enjoy higher profit percentage while selling similar services in a different format. It too is trying to cut into cloud services. However, it spends less money on plants and equipment compared to cloud providers.