December 26, 2012
Amazon Web Services (AWS) held its first global customer and partner conference, re:Invent, in late November in Las Vegas, attracting approximately 6,000 attendees. While aimed squarely at developers, AWS highlighted two key themes that will appeal directly to enterprise IT decision-makers:
- Continued global expansion. AWS cites customers in 190 countries, but the company is clearly pushing for greater penetration into enterprise accounts via aggressive global expansion. AWS now has nine regions (each of which has at least one data center), including three in Asia Pacific: Tokyo, Singapore, and Sydney.
- An expanded services footprint within customer accounts. The major announcement at re:Invent was a limited preview of a new data warehouse (DW) service called Amazon Redshift — a fully managed, cloud-based, petabyte-scale DW. As my colleague Stefan Ried tweeted during the event, with a limit of 1.6 petabytes, this is not just for testing and development — this is a serious production warehouse.
Beyond the above themes, what really struck me at this event was how unique AWS’s overall position still is among enterprise IT infrastructure providers. AWS’s enterprise value proposition has always centered on the predictability of pricing via a subscription-based, pay-as-you-go model. Executives at the event admitted to seeing an increased presence of competitors selling similar infrastructure-as-a-service (IaaS) offerings, but claim that it’s mostly traditional on-premises infrastructure providers pushing private clouds. This remains true for one major reason: Cloud economics still aren’t appealing to most IT vendors, who gain far more benefit from selling traditional on-premises infrastructure in large enterprise deals via high-margin upfront license costs and ongoing maintenance fees.
In contrast, AWS is actually doubling down on its self-defined mandate to operate as a high-volume, low-margin business. Witness its announced 25% storage price reductions on Amazon S3 that went into effect on December 1, 2012. In addition to directly responding to Google, AWS is clearly attempting to further disrupt traditional IT market economics and force on-premises infrastructure providers to adapt; this degree of direct attack on the status quo will continue to benefit IT buyers.
But it’s not all roses for AWS. Customers and partners cited several challenges that must be addressed to drive increased usage of public cloud-based services within the enterprise:
- Reconciling internal infrastructure with cloud services requires a hybrid architectural approach. Organizations are primarily using AWS to augment existing on-premises infrastructure; there remains little sign of organizations embracing AWS services to decommission existing legacy systems. Enabling a hybrid architectural approach to leverage existing, consistent services and policies across internal services and public cloud services is quickly emerging as a primary challenge given almost all organizations’ lack of skills and experience in this area.
- Cost savings alone will not drive adoption of public cloud-based services. Several large customers stressed this point during the event. For NASA, speed of provisioning was the biggest benefit. For Netflix, the key was avoiding vertical-scale single point of failure infrastructure. For others, it was some combination of scalability, performance, and availability. To expand its footprint, AWS must help organizations properly set internal expectations to avoid unreasonable expectations aimed exclusively at cost control.
Overall, this was a well-executed event. Here’s hoping for further IT market disruption from AWS (and other public cloud providers) in 2013.