Here’s One Thing Amazon Must Do to Keep Its Cloud Mojo Going Strong

August 1, 2016, 4:30 PM UTC
Fortune Brainstorm TECH 2014
Fortune Brainstorm TECH July 15th, 2014 Aspen, CO 11:10 AM AT YOUR SERVICE Andy Jassy, SVP, Web Services,
Interviewer: Adam Lashinsky, Fortune Photograph by Kevin Moloney/Fortune Brainstorm TECH
Photograph by Kevin Moloney — Fortune Brainstorm TECH

Retail giant Amazon (AMZN), now the fourth most valuable U.S. company, also continues to build its cloud computing arsenal.

On its second quarter earnings call last week, the company said Amazon Web Services’ sales grew 58% year over year to $2.89 billion. Earlier that week, Gartner (IT) released new research estimating that AWS stores nearly double the amount of data as the next seven cloud competitors combined. (The actual figure was 1.6 times the data for sticklers out there.)

This despite the fact that Microsoft (MSFT), Google (GOOG), IBM (IBM), and nearly every telecom company out there has tried to take on AWS by offering their own shared computing, storage, and networking infrastructure.

So is the Amazon cloud invincible? Not really.

If the company, which even rivals agree is an execution machine when it comes to churning out new features and functions, is to continue to dominate, it has to get better at, to borrow a rival’s words, “meeting customers where they already are.”

That means helping businesses keep some of their IT processes and computing power in their own data centers and server rooms, while also moving some to the public cloud. Or fostering better interoperability between those two pools of resources.

Currently, AWS remains mostly about vacuuming a customer’s digital stuff up into Amazon’s cloud rather than fostering a smooth way to let a company’s own computers work in tandem with Amazon infrastructure.

That ability to run some jobs on corporate-owned-and-operated computers and others in a public cloud run by some other provider, is typically called hybrid cloud.

AWS executives used to treat that notion as anathema, while virtually every cloud competitor—trying to play catch up with AWS—stressed that for most customers hybrid is the answer. Most corporate customers are still not comfy with the idea that their critical accounting applications and top-secret data be handled on machines they don’t own and can’t touch or see. They want a lot of that stuff to stay under their control.

But Amazon’s stance seems to have shifted over the past two years during which time even AWS CEO Andy Jassy has uttered the term “hybrid” in public. It’s posted a list of hybrid cloud customers to its web site.

And, last week, when Amazon chief financial officer Brian Olsavsky was asked about future cloud investment areas, he said:

You can see us continue to invest in things like new application services, higher up the stack, additional technologies that will make integrating with AWS seamless for those companies that have a hybrid IT environment and then continuing to add functionality for data analytics, mobile, Internet of things, machine learning offerings, things like that, that will add greater and greater value for AWS customers.

(Emphasis is mine.)

Cloud computing consultant MSV Janakiram said AWS will deliver more “hybrid” services and cites AWS Storage Gateway, DynamoDB Local, and OpsWorks as current Amazon cloud services that can be deployed on premises.

Amazon Trots Out More Ways to Get Your Stuff into its Cloud

The idea of hybrid cloud is made much easier when the technology running on both sides of the public-private divide is similar, ideally it should be identical. That means workflows can, um, flow back and forth with minimum muss and fuss. That’s why Microsoft (MSFT) has been touting Microsoft Azure public cloud on one side and something called Microsoft Azure Stack running on corporate data centers on the other. Azure Stack is a sort of “mini-me” version of Azure that a smaller company can run on its own servers and storage gear.

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That plan hit a rather major speed bump last month, however, when Microsoft acknowledged that the first version of Azure Stack won’t be out till the middle of next year, and will initially only be available on what it called “co-engineered integrated systems” from Dell, Hewlett-Packard Enterprise (HPE), and Lenovo (LNVGY). Azure Stack had been expected to debut this year.

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Long-time AWS watchers, expect that as the company continues to woo big Fortune 500-type accounts, the company will have to do some sort of Azure Stack-like AWS pod that can run on corporate premises, although AWS officials have never said anything along those lines.

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