Analysis: Cloud juggernaut Amazon rolls on
By Edwin Yapp November 24, 2015
- Not just focusing on enterprise customers but enterprise vendors in cloud battle
- Creating stickiness via greater feature set, tools and innovation customers want
ANALYSIS: IN 1986, the British pop band Tears for Fears won the Brit Award for best single for its hit Everybody wants to rule the world.
The ambition to ‘rule the world’ isn’t lost on at least one company, albeit its sights are not on the physical world, but rather the cloud world.
That company is Amazon Web Services (AWS), a wholly-owned subsidiary of Amazon.com Inc.
Beginning life in 2006 as an Amazon experiment on selling computing resources that no one thought was possible at the time, AWS has gone from strength to strength since its inception.
A year ago at its re:Invent 2014 conference, AWS tried dispelling the notion that it was just another cloud provider for small-time startups to host their apps, or that it could only host apps that were meant for test and development environments.
The idea at that time was to prove to the world that it had the chops -- both the technology and the knowhow – to run the largest and most feature-driven public cloud there is in the world.
AWS cloud chief Andy Jassy proclaimed that one day, AWS would have the potential to be the largest business – something to the tune of US$70 billion in revenue – for Amazon.com in the long term, and may even eclipse its parent company’s revenue.
Critics and naysayers were sceptical about his claims, largely because AWS at the time did not break out detailed figures about its revenue and operating income.
Various analysts had tried figuring these numbers out, and while there wasn’t any scientific accuracy to this exercise, the general consensus was that AWS makes between US$4 billion and US$5 billion a year.
However, the unknown variable remained its expenditure, making it hard to determine if the business was profitable or not.
But as of April 2015, all doubts were dispelled as the online giant finally softened its stance against making its revenue and profit numbers public, and reported not only great revenue but also a healthy operating income – something that was very significant.
The Seattle, Washington-based company has been reporting an increase in revenue every quarter since that disclosure. Its latest nine-month revenue and operating income was US$5.474 billion and US$3.224 billion respectively.
Some believe that AWS could potentially close this year with a run rate in the region of a whopping US$8 billion in revenue, and if it were to spin off as a public company its valuation could be anywhere between US$70 billion and US$160 billion.
Others believe that AWS has the competition effectively whipped with its pace of innovation, its all-powerful public cloud infrastructure, and the continued investments into new services and product offerings.
Out of character
At re:Invent 2015, the theme of ‘ruling the cloud’ was even more evident than last year’s conference (pic above).
AWS made a slew of announcements and previewed a number of new features, all designed to extend the notion that it is the choice of public cloud operator not only for fast, agile startups but also large global companies.
Many of these announcements were very technical in nature but there were some less technical ones that caught the eye, not the least because they reinforced the notion that AWS wants to rule the cloud world.
The first was Amazon QuickSight, a cloud-powered business intelligence (BI) service the company says caters to non-technical personnel, designed to help them quickly get business insights from their data.
The second was Amazon Snowball, a hardware appliance designed to enable petabyte-scale data transport that can securely transfer 50TB (terabytes) per appliance per time of data, and can be physically transported between two or more locations.
What’s interesting about QuickSight and Snowball is that while analysts and industry pundits have been accustomed to AWS introducing software development tools for its Infrastructure-as-a-Service (IaaS) platform, the move to develop a Software-as-a-Service (SaaS) tool and a hardware appliance is uncharacteristic.
For instance, QuickSight has the potential to offer AWS customers a competing product to Salesforce.com Inc’ Wave, introduced last year, as well as what other smaller SaaS analytics players such as Tableau Software Inc, and startups such as Platfora Inc and Interana Inc are offering.
But according to AWS product general manager Matt Wood (pic), AWS is not necessarily getting into the SaaS or hardware game because the core of what the cloud giant does is to use technology to “simplify problems on behalf of customers.”
“People may ask: What is a company doing IaaS getting into analytics or building a hardware appliance?” he told Digital News Asia (DNA) on the sidelines of re:Invent 2015.
“The truth is that all of these are examples of the approach of how we do things. We don’t shoehorn or pigeonhole ourselves into a particular role or into a way of solving a particular problem in a particular way.”
Wood said both QuickSight and Snowball are products that were born out of the needs of its customers.
AWS “begins with the end” in mind by building solutions that customers want solved, he declared.
“We look at problems and solutions in a particular way, and we end up with solutions such as Snowball, where a cloud computing company is building an appliance to help customers get in and out of the cloud,” he said.
“QuickSight is the same as it’s about building an analytics tool that our customers want – something that’s easy for non-technical people to use, and at a fraction of the cost of what’s out there in the market,” he added.
However, Gartner research director Michael Warrilow argued that while QuickSight and Snowball do help customers with their challenges, the underlying reasons for building such tools go beyond just solving customers’ problems.
Speaking to DNA at re:Invent 2015, Warrilow said such moves would help “cement the company to its customers” for the longer term.
“It’s easy to get into an AWS environment and out of it. For example, you can import and export data easily if a customer doesn’t use the more advanced services it offers.
“But by providing customers with more means [such as QuickSight and Snowball], AWS is able to get them to use more of its services, and this means that customers are more likely to stay with them,” he noted.
Warrilow also said that having these continued data services keeps AWS’ platform ‘stickier’ and will help it compete against the likes of Oracle Corp and Microsoft Corp, both of which have competing cloud solutions too.
AWS vs the ‘old guard’
While ruling the world may be top-of-mind for AWS executives, the path is fraught with challenges from the old guard, competitors hell-bent on protecting their customer base.
Still, Jassy (pic above) was very clear in signalling AWS’ intention on taking on these players, and he even launched a broadside on Oracle.
In his keynote, he declared that AWS was able to free customers “from bad database relationships,” alluding to the Redwood City, California-based database giant, which has the lion’s share of the enterprise database market today.
At a press session following his keynote, Jassy continued this rhetoric, saying, “Most tech companies, particularly the old guard, have lost their will to invent, and they really acquire [rather than develop] a lot of their technology.
“That can work too, but it’s very expensive as it tends to not fit that well together as it’s based on mixing and matching technology that wasn’t built from scratch.
“AWS, on the other hand, are pioneers and we hire builders who want to reinvent things for our customers,” he declared.
The marketing assault on Oracle had actually begun last year when Jassy introduced Amazon Aurora, a cloud-based, MySQL-compatible database engine for Amazon Relational Database Service.
The service was designed to bridge the gap between the high performance of commercial, high-end databases such as Oracle and Microsoft SQL, and the low cost of open source alternatives such as MySQL and PostgreSQL.
Following up this year, AWS continued to take on Oracle by introducing the AWS Database Migration Service, which allows customers to migrate their production Oracle, SQL Server, MySQL, and PostgreSQL; support for a new database flavour – MariaDB – to AWS; and the AWS Schema Conversion Tool, which makes it easy for enterprise customers to switch database engines.
For its part, Oracle founder and chief technology officer Larry Ellison recently conceded that native cloud companies are the true challengers for its enterprise crown, rather than Oracle’s decade-long rivals IBM Corp or Germany’s SAP SE.
“Our competitors are this whole new generation of cloud companies. We’re focused on the infrastructure companies like Amazon and the SaaS companies like Salesforce …,” Ellison said at the annual Oracle Open World conference.
The edge that Oracle, and to a lesser extent Microsoft, has over AWS – at least for now – is the fact that so much of the world’s large enterprises’ are on legacy systems.
In its bid to take on the old guard, AWS will have to deal with the large number of customers that are on-premises and not cloud-enabled, and whose workloads and apps aren’t easily movable to a public cloud infrastructure such as AWS.
These enterprises may prefer a cloud configuration known as the hybrid cloud, a platform that has the best of both worlds – the security and privacy of a private cloud, as well as the agility and cost advantage of a public cloud.
Acknowledging this, Jassy said there may be still some companies which for the next 10 or more years, would operate and own their own data centres – either because it’s too troublesome for them to move their workloads, or because it’s not worth their while, perhaps since their applications reside on mainframes.
That said, he believes that “over the fullness of time, relatively few companies will run their own data centres.”
“I don’t know when that might be, but we are building tools to help these customers move over,” he said.
“Tools such as the AWS Schema Conversion Tool and the AWS Database Migration Services are examples.
“We’re trying to build capabilities that help the people who still want to run their own legacy data centres alongside AWS,” he added.
Analysts DNA spoke to believe that AWS’ version of the hybrid cloud is substantially different from what other legacy players such as Oracle, IBM, Microsoft or VMware Inc are offering, as AWS will always want enterprises to shift as much data as possible onto its public cloud platform.
Gartner’s Warrilow (pic) said that across South-East Asia, more chief information officers (CIOs) are realising that the cloud is an inevitable part of the enterprise, and the issue for them is which service provider to go with.
“What I’ve seen is that end-users choose AWS if they’re after the best feature set, and Microsoft if they are centred more on the Microsoft stack.
“Microsoft may also be in the position to give existing customers better discounts because it has a better relationship with its customers, whereas customers may have to earn the discounts from AWS as the more they use it, they more they save,” he said.
Asked how much of a threat players such as Microsoft and Oracle were to AWS, insofar as the hybrid cloud model was concerned, Warrilow said AWS would have to keep to the qualities that made it successful as it shifts from serving developers to serving large multinational enterprises.
“Can AWS keep what makes them successful – that is their ability to be lean and agile, easy to deal with – as it starts to cater to the unique and very strong demands of large enterprises such as General Electric, Capital One, and governmental clients?
“Can it still be lean and fast, with the extra baggage on it? That is the question AWS faces next,” he said.
Still, there are others who believe AWS is on the right track.
Forester Research, in its quick-take analysis of re:Invent 2015, noted that “consistently, persistently, doggedly,” AWS is addressing real and perceived limitations in its core services.
The analyst firm said it is making it easier for enterprises to move and secure data in the cloud, and integrate public cloud capabilities with technology still running inside their own data centres.
“AWS is messaging consistently and at last recognises that the hybrid cloud is real. Its technology is evolving to recognise today’s hybrid reality and to smooth the path to AWS’s preferred endgame – a hybrid cloud future in which hybrid means making whatever remains on-premises seamlessly, painlessly, and continuously feed the public cloud.”
Edwin Yapp reports from re:Invent 2015 Las Vegas, at the kind invitation of Amazon.com. All editorials are independent.
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