Amazon Web Services has made huge progress in a short time. The business is only ten years old. And yet It doth bestride the narrow world like a Colossus.
At least AWS dominates the narrow worlds of enterprise IT and cloud computing.
Dominate is an understatement. The company created cloud computing and remade today’s enterprise IT world in its own image.
AWS is secretive about numbers, but expect revenues north of US$10 billion in 2016. In the first quarter it took US$2.6 billion. Growth is a whopping 64 percent year-on-year.
AWS Auckland Summit
The AWS Summit Auckland is now New Zealand’s second biggest technology event. Microsoft TechEd — rebranded this year as Microsoft Ignite — remains number one.
You can’t move in the enterprise computing world without hearing the AWS name. It killed business hardware sales. The old big name brands struggle to give servers away these days.
Thanks to AWS, Microsoft spent billions building its own Azure cloud capacity. It is number two and has some great cloud technology, but still trails AWS. IBM is even further behind.
On every list
The rest of the IT market shudders and crosses itself when customers mention AWS. Make no mistake, the company is somewhere on almost every sizeable organisation’s technology shopping list. Even if they don’t buy AWS, they’ll benchmark their chosen cloud suppliers against Amazon.
AWS has the cream of New Zealand’s technology sector among its customers. At the Auckland Summit it paraded the local royalty: Xero, Vend, eRoad and Orion Health. The New Zealand Defence Force featured in the keynote.
And yet during a media panel session, AWS’ Richard Busby says: “We don’t have significant market penetration”.
Busby has a point. Revenues are small in comparison with the total IT spend. It earns US$10 billion a year. That is small compared to revenue at Microsoft, Apple, Google or HPE.
Gartner estimates cloud accounts for a mere 4 percent of the entire technology market. Yet it is fast-growing while other areas are static or in decline. The analyst company says total cloud spending will be US$240 billion next year.
Much of the value in AWS sales goes to consultants and integrators. There was a bazaar-like atmosphere at the Summit. There local partners pitched for AWS-related work. It’s a vibrant, bustling secondary market.
Partners include New Zealand’s Datacom and Revera. Apart from anything else, the pair connect AWS to the government cloud panel.
Busby went on to say: “It’s still early days for AWS, in training and skills we’re only getting up to speed.”
Glenn Gore, head of technology, Amazon Web Services, Asia-Pacific is more specific.
He says AWS market penetration in government is still low relative to other sectors. In part that’s because New Zealand’s government has only recently come to terms with sending data overseas.
He says AWS does better in certain industries; banking, insurance and the financial sector. Gore says Australia’s — and New Zealand’s — big banks all have some business with AWS.
Meanwhile AWS continues to expand its scope.
Few weeks pass without AWS announcing another new service. The company hosts them in giant data centres and delivered over the internet. Most sell for a few dollars a month. Once businesses needed to spend vast sums of capital to get the same functions.
Today it offers a bewildering array of services. They range from raw number crunching, to storage and up to the lofty reaches of machine learning. Last year AWS let slip over one million companies worldwide now use its services.
At the Auckland Summit AWS said has 1,000 partners in Australia and New Zealand who service “tens of thousands of customers”.
The rise of Amazon rocked the entire computer industry, not just the enterprise market.
Hewlett-Packard’s split into two companies was a direct response to the challenge. So was Dell’s decision to go private, then buy EMC.
Microsoft swapped Windows-era CEO Steve Ballmer for cloud-era Satya Nadella. IBM and Oracle reeled from the Amazon competition.
Even wealthy Google is pouring its rivers of gold into building Amazon-like cloud services.
Not every organisation finds it easy to move to the cloud. For every cloud native like Xero or Vend, who whip through the transition, there are those who struggle. Gore says the ones who find it toughest are those who start with a bad architecture.
For them, the answer is to move via an interim step; the hybrid cloud. These organisations might move some functions to the cloud now, while they keep old systems hanging on until they are ready to move.
There are two ways of making the transition. Some look at which apps are likely to do well in the cloud, while others start with areas of their technology that are currently failing. It’s a simple matter of methodology. What no longer appears to be on the agenda is large numbers of organisations saying they don’t plan to move.
AWS may have been slow in the past to offer the services to help these more conservative customers move. To be fair, when you’re growing at 60 percent a year, there’s enough work managing the demand. Now it says it has a managed services programme to help customers prepare for their cloud future.
Amazon’s cloud growth has been exceptional. Until ten years ago the company’s computers were running its online retail operation. Now they run a large slice of the world’s business. But others are learning how to do the same. Microsoft and Google have cloud operations which are growing as fast. One thing is clear, AWS won’t be able to talk about not having market penetration for much longer.