Hedging its bets, AWS evolves into holistic cloud provider
By Edwin Yapp January 13, 2017
- Extends leadership in bid to become the core for all things enterprise
- Evolving to accommodate hybrid models; gearing up AI battle
ANALYSIS: AS the dust settles on the recently-concluded Amazon Web Services re:Invent 2016, one thing is clear: cloud behemoth Amazon Web Services (AWS) Inc is far from done innovating and is once again gearing up for new battleground frontiers.
At its annual developers’ and users’ conference held in Las Vegas in Dec 2016, AWS executives were not only busy selling the idea of its version of the cloud but were also pushing new boundaries in making cloud technologies ubiquitous in the life of the enterprise.
The Seattle, Washington-based cloud provider has long been on the warpath to champion cloud technologies as ‘the new normal’ in the everyday life of businesses, and has for the most part been successful in doing so.
The cloud powerhouse continues to show why it is arguably the leader in this space. At this year’s re:Invent 2016, AWS showcased a number of new innovative solutions in a bid to prove that it’s not resting on its laurels despite being the clear leader in the cloud game.
The company’s relatively newly minted chief executive Andy Jassy (pic above) set the tone by telling the over 32,000-strong audience at his keynote address that Amazon continues to see more organisations of all kinds – from businesses, government, academia to non-profits – migrating their workloads and applications to the cloud.
Citing Gartner’s yearly cloud scorecard – The Gartner Magic Quadrant for Infrastructure-as-a-Service report – Jassy claimed that AWS’ cloud is 10 times larger than the next 14 competitors reported in the Magic Quadrant combined.
From a revenue and profit perspective, the company has shown growth in increasingly tough conditions. AWS reported US$11.1 billion in revenue during the 12-month period ending in September 2016.
Revenue from its third quarter alone amounted to US$3.23 billion, growing by 55% year over year. Last quarter’s operating profit stood at US$861 million, growing by 101% year over year, which represented an operating profit margin of 27%.
At a press briefing following his keynote, Jassy fielded a wide-range of questions – from growth to maintaining its position as the leader to conflict of interests for AWS.
He began by acknowledging that while he was pleased with AWS’ growth, he did not think that AWS will be the only dominant player in the cloud as the market is large enough for several large cloud companies to co-exist.
Jassy believed that in the fullness of time, relatively few companies will have their own data centres, and this means that all that computing will eventually move to the cloud.
“It may not be a large number but there will be several players in multiple geographies that will be successful, and we’re very optimistic we’ll remain the significant leader,” he declared.
When asked when AWS’ business could surpass that of its parent and consumer business, Amazon.com Inc, Jassy said the latter is a US$100-billion-plus business and still growing, “so it’ll take several years for that to happen, but the company is optimistic that it could happen.”
As to whether he thought AWS would be spun off as a separate entity because of its earning potential, Jassy conceded that many had been asking if this were possible, noting that “there are no plans to do so [as yet].”
“I will never say never, but there’s no compelling reason for it. Amazon.com has been so generous and gracious in aggressively funding AWS that there’s no reason to do it,” he said.
Jassy was also asked if there were possible conflicts of interest in AWS serving enterprises that compete directly with their parent Amazon.com, notably Netflix Inc, which uses AWS’ cloud but is in direct competition with Amazon.com’s Prime Video services.
To this, Jassy argued that AWS is a completely separate entity from Amazon.com’s retail operation, with different leadership teams steering the two entities. While Amazon’s consumer and retail businesses are big and important customers of AWS, they’re no more important than other big, external customers, Jassy claimed.
“Netflix is all-in on AWS [cloud] but the reason it chose to use AWS [despite Amazon being a competitor] is because they knew they’d be treated every bit as important a customer as Amazon the retailer is. And that’s been the case.”
AI to the fore
Being an acknowledged leader in an industry segment may be the privilege of a few in today’s fast-changing globalised world and while AWS leads the market today, Jassy revealed that the company isn’t sitting still and is consistently innovating.
To that end, AWS announced a slew of new services at re:invent 2016, some of the major ones are listed here. Amongst the more eye-catching ones were the launch of a trio of artificial intelligence (AI) and machine learning services known as Amazon Rekognition, Amazon Polly, and Amazon Lex.
Various industry analysts noted that these newly launched AI-based services are designed to show that not only could AWS defend its turf in the cloud arena but it could also show itself to be a credible player in the nascent field of AI and machine learning.
This is where the next battleground is taking place, as old stalwarts the likes of IBM, Microsoft Corp, Google Inc are heating up in the artificial intelligence (AI) and machine learning space.
All three major cloud providers have signalled their intentions to invest heavily on AI and deep and machine learning. Microsoft’s Satya Nadella talked up its AI plans at its Microsoft Ignite conference in September, as did IBM’s Ginni Rometty at its World of Watson conference in October.
Meanwhile, Google hired leading AI scientists Fei-Fei Li, the director of Stanford University’s Artificial Intelligence Lab and Jia Li, the head of research for Snap, the parent company of popular social messaging app Snapchat last month. Amazon.com also added Alexander Smola, a professor in the machine-learning department at Carnegie Mellon University to its AI research arm.
Gartner research director Michael Warrilow noted that AWS has been “slightly behind and a little later than most in announcing its AI and machine learning plans” but he believes it isn’t necessarily a defensive step on its part.
“Certainly AWS has been later to discuss its capabilities in AI and machine learning – relative to Google, IBM and Microsoft – but that doesn’t mean it hasn’t been investing,” he told Digital News Asia (DNA) in an email interview.
“Gartner believes that applied AI will be a primary battleground for service providers through 2020,” he explained. “We expect that 20% of enterprises will employ dedicated people to train neural networks by that time, so we believe AWS is not [that] late [in AI].”
While AI did somewhat hog the headlines during re:Invent 2016, it wasn’t the only significant piece of news that came from the cloud provider. Gartner’s Warrilow said what impressed him most this year was the pace at which AWS is adding new features and service.
Amongst them are new features he said were key in edge computing; new virtual machine instance sizes and families; PostgreSQL support in the Aurora database engine; Amazon Lightsail, a new virtual private servers feature; Amazon Athena, a database query engine; Amazon Shield, a new security feature.
The analyst also noted that the cloud provider is ramping up to protect and expand their rising position by adding new data centre regions in Canada, France, and the United Kingdom.
Besides these key points, AWS is also fortifying its position in the hybrid cloud game as the company now offers more ways than one to make it easy for enterprises who still want to keep their own data in their own data centres to transport data to AWS cloud for processing purposes.
Last year, AWS introduced a standalone hardware device called the 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.
Recognising the greater demand for such devices, AWS this year introduced two other devices – Snowball Edge and the Snowmobile (pic, above) The former is a souped-up version of the Snowball, with larger storage capacity and localised data processing capabilities. The latter is a tamper-resistant, full-size shipping container on wheels that measures 15 x 3 x 2.6 meters.
The Snowmobile is capable of carrying up to 100 petabytes (PB) of data and can help any company move exabytes of data onto AWS’ cloud facilities in a matter of weeks instead of months, claimed AWS.
And in November, AWS entered into a strategic alliance with virtualisation giant VMware Inc, a company that now belongs to Dell Technologies through the takeover of VMware’s parent EMC Corp. The alliance will enable VMware customers to run their software on their own data centre while having the option to move their workloads on AWS cloud.
The move was unexpected as VMware had been a fierce competitor to AWS with its CEO Pat Gelsinger having said that VMware wants to own corporate workload,” according to tech portal CRN.
“We all lose if they [AWS] end up in these commodity public clouds,” he had said then in 2013. “We want to extend our franchise from the private cloud into the public cloud and uniquely enable our customers with the benefits of both. Own the corporate workload now and forever.”
The about-face turn by VMware is a sign that public cloud players are serious contenders for traditional enterprise data centre workloads and that VMware cannot afford to ignore these players anymore.
It’s also indicative that VMware’s own hybrid cloud strategy hasn’t gained much traction with its customers, many of whom prefer to scale out towards AWS, the leading public cloud player.
What it means for AWS
For AWS, the provision of the two hardware options as well as the alliance with VMware are the clearest signals that AWS doesn’t expect all its customers to only use its cloud and that they would still have data they would like to hang on to but which still needed processing.
Asked if AWS’ views towards hybrid cloud were thawing, Gartner’s Warrilow said that it was more about the company “fine-tuning” its approach towards hybrid clouds.
“The partnership with VMware is about AWS hosting VMware’s workloads. Think of it as ‘VMware-as-a-Service’, offered by VMware but running in AWS data centres.
“The evolution of their strategy is towards edge computing – as epitomised by Snowball Edge and Snowmobile. This will assist in industrialised environments, including transient/ disconnected/ remote data needs.
“For me it’s more accurate to say that AWS is realising that not all enterprise workloads will—or should—go to public cloud. It could also be seen as a proactive response to Microsoft Azure Stack (due in 2017).”
Edwin Yapp reports from AWS re:Invent 2016 in Las Vegas, at the invitation of Amazon.com Inc. All editorials are independent.
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