Over the last decade, Amazon Web Services has become the focal point of every tech company, most of which are now fighting to build their own public clouds. That includes computing pioneer IBM (IBM), database giant Oracle (ORCL) and software behemoth Microsoft.
Not even Amazon’s biggest rivals can question the success of AWS of late. For it’s most recently reported quarter, the cloud computing arm of Amazon reported revenue of $3.2 billion, up 55% year over year, putting it at a close-to $13 billion annual revenue run rate going into 2017.
Perhaps more importantly for those who insisted that AWS was a loss-leader for its parent company, the cloud unit reported profit of $1.02 billion for that period, at least if employee stock compensation is excluded. With that compensation factored in, profit was a still-healthy $821 million, up from $428 million from the year before.
But 2017 will not be a walk in the park for Amazon (AMZN) largely because at least some of those tech rivals mentioned above have gotten their acts together, building data centers worldwide, and investing heavily in their public cloud services.
Microsoft (MSFT), in particular, has been making progress, says Dave Bartoletti, principal analyst for Forrester Research (FORR). Microsoft Azure is now a strong number two in public cloud while Google (GOOG), IBM (IBM), and others battle it out for the number three slot, in his view.
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In the face of that heightened competition, Amazon must continue to appeal to its core base of developers at small companies, who started flocking to its services ten years ago, using credit cards to rent servers and storage, typically circumventing IT control. And it must now also woo those same IT people, as it seeks more big corporate business. That’s a fine line.
In fact, it’s almost schizophrenic. Every year at the annual AWS Re:Invent conference, one day is dedicated to products geared for IT professionals who typically work to provision servers and storage, and maintain databases. Another day is all about cutting-edge and the latest trending tech, like tools for the Internet of things.
Amazon has been very strategic—and ambitious—with new products for that IT demographic. Two of the hardest-to-dislodge technologies in big companies are Oracle databases and VMware virtualization software. It is very difficult to move customers off these deeply entrenched products, no matter how much the companies might like to do so.
“Every year one goal for most companies is to reduce spending on Oracle and VMware, and every year IT comes back and say ‘we didn’t do it.’ That’s because to reduce spending on Oracle and VMware requires risk and money,” Bartoletti says.
For the past few years, AWS has targeted Oracle with such products as a MySQL database clone and a database migration tool to automate the tricky process of moving on-premises Oracle (or Microsoft) databases to AWS. This year, it announced its own managed version of PostgreSQL. PostgreSQL, is seen as a more enterprise-ready, open-source database than MySQL, which Oracle owns.
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And for all those petabytes of corporate data accumulating in company data centers over the decades? This year, AWS came out with an actual truck, dubbed Snowmobile, which it says can securely ship up to 100 petabytes of data from corporate server rooms to an AWS facility in one fell swoop. It seems like brute force—and it is—but face it, using even a high-speed network connection moving that amount of data would take forever. Amazon says Snowmobile will enable companies to move an exabyte (or 1,000 petabytes) of data to Amazon in six months or so. That same data transfer would take 20 years over a fast, 10Gbps dedicated connection, the company said.
On the VMware (VMW) side, AWS and VMware are working together on VMware Cloud on AWS, due out in mid-2017. In theory, it will let VMware customers run their existing VMware operations directly on AWS servers.
This was pitched as a win for joint customers and both AWS and VMware. But most cloud watchers suspect that many of those VMware users will end up moving their VMware workloads to AWS and then, over time, off of VMware altogether. Time will tell.
But for those who think AWS has already won the public cloud wars, remember, it’s hard to maintain technology dominance over many generations. And also remember, that big Fortune 500 companies have barely put their toes in the water yet. Most estimates hold that 5% or 6% of big company workloads are in the public cloud at this point. That’s the tippy-top of an enormous ice berg.
That leaves the other cloud providers—at least those with big checkbooks—with room to maneuver.
