Microsoft has always been a giant in the tech world, but in the past month, it’s shown exactly why it deserves the distinction of being one of the greatest tech firms of all time. In late November, it surpassed its biggest competitor, Apple, as the world’s most valuable company. This incredible surge can be attributed primarily to Microsoft’s keen ability to capitalize on their strengths and walk away from their weaknesses. Microsoft’s best bet as of late was on its cloud service.

A cloud service, put simply, stores software and services that run independently of a person’s individual computer. Most big tech companies have started to invest heavily in the cloud—Google Drive, Dropbox, Apple iCloud, and Netflix, for instance, are all versions of the cloud. Currently, however, the two biggest competitors in the cloud market are, first, Amazon Web Services (owning 33% of the market) and second, Microsoft’s Azure (owning 13% of the market).

Azure was originally announced in 2008 and was launched in 2010, but it didn’t achieve prominence until the current CEO of Microsoft, Satya Nadella, took over in 2014. Under Nadella, Microsoft placed much more emphasis on developing and refining Azure, and there have been clear results: in the first quarter of Microsoft’s 2019 fiscal year, Azure revenue increased 76%, and it’s estimated that Azure might overtake Windows by 2021 in terms of revenue contribution to the company. So what accounts for Azure’s success?

The key reason that Azure has become wildly successful in the cloud market is the company’s history. Microsoft, at its heart, is a software company: one of their earliest products, for example, was Microsoft Office, a suite including popular applications like Word, Excel, and Powerpoint. As such, Microsoft already had a plethora of products that they were able to seamlessly integrate into the cloud. The only difference was that instead of having consumers buy a copy of the software, they now simply lease it, and the software runs remotely on the cloud. Users probably know about the cloud version of these apps as Office 365.

But beyond just Microsoft’s successful integration of former, already popular software applications into their new cloud service, Microsoft’s strong background in the software market has made them easily able to understand the needs of their consumers. As such, they were able to create a huge scope of digital services (Azure currently provides over 600) while still putting their consumers first.

Microsoft in particular was able to more effectively achieve these ventures by developing two of the hallmarks of successful cloud services: a well-developed hybrid structure and artificial intelligence (AI). Microsoft’s hybrid structure—meaning that it has both a “private cloud” for individual businesses/ventures and a “public cloud” shared by all users—is much more tailored towards customer needs than its competitors.

In addition, Microsoft’s AI division was wildly successful primarily because its size. At the onset of Azure, Microsoft, realizing the opportunity inherent in the cloud platform, poured an absurdly high amount of resources into AI: at its conception, Microsoft already had 5,000 employees in its AI unit, and that number jumped to 8,000 within a year. Microsoft’s AI unit, therefore, is much more innovative and successful than most of their competitor counterparts.

Thus, the reasoning for Microsoft’s success with Azure is twofold: first, having already been in the market for software, Microsoft already has a huge stake in the software market, making it easier to integrate into cloud services. More importantly, Microsoft has an intimate understanding of how software services should be marketed, and how best they can benefit customers, and as such, are able to dominate the market. Secondly though, Microsoft made excellent strategic moves to ensure that their cloud works well, specifically focusing in on a successful hybrid structure as well as successful AI. With these two in mind, there’s no doubt that we’ll continue to see Microsoft float to the top.

Sources: Forbes, Forbes, Forbes, Recode, Business Insider, CNBC, The New York Times, Microsoft, Ce Global