Amazon Web Services (AWS) Builds Enterprise Appeal

The fact that the IT industry is being fundamentally disrupted by the Cloud and the As-a-Service Economy is old news. What is newsworthy is the pace of the change that has brought these delivery models into the business mainstream, which is staggering. As we mentioned in our recent look at the Top 10 IT services players, the market has only just come to terms with the rise of the Indian-heritage service providers and is now having to react to the rise of cloud (IT-as-a-Service) providers, and in particular AWS.

 

Currently, there are two main use cases for cloud:

 

  1. DevOps: application operations and development – the most common use case today
     
  2. Core IT/datacenter replacement

 

The first case has obvious benefits, IT departments and business units are looking to take advantage from agile nature of cloud as an application platform to build and run new solutions quickly, and cost effectively. The second benefits from higher utilization rates of cloud, long-term flexibility and avoiding capital expenditure.

 

HfS recently attended the Amazon Web Services (AWS) re:invent conference, with almost 20,000 others. There were a number of announcements made at the event that demonstrated AWS’s increasing focus on the enterprise space. We will comment on the partnership with Accenture later this month.

 

The bulk of these announcements focused on migrating companies to the cloud, providing enterprise class cloud databases and providing tools for data analytics, including dealing with streaming data and tools for fast and automatic visualisation for data. Essentially, adding in automation and services that help customers move existing work into the cloud whilst providing services that make add value to work already in the cloud. AWS shared examples of clients such as GE and Capital One shifting the majority of workloads to the cloud. For example, GE is closing 30 out of its 34 data centers and is moving 60% of its workload to AWS.

 

Many of the extra functionality and additional tools being added, are aimed at differentiating AWS, making its services distinct and less of a commodity, at least for many of its clients. This is somewhat at odds with the common perception of cloud, particularly when these add-ons form part of the core IaaS offer. For many, the concept of public cloud includes a lack of lock-in and maximum portability. However, as the IaaS providers add more features, it becomes increasingly difficult to make this happen. AWS leadership described using a single-pane orchestration cloud platform that commodifies cloud, as getting the lowest common denominator service.

 

Whilst this is true, it doesn’t account for a large number of enterprise customers that welcome cloud partly as a way to commodify compute. In many ways events like re:invent can turn one’s head, particularly given the success of AWS in recent times, however, it is important to stay objective when we look at the future adoption of public cloud. There is still some way to go in convincing many enterprise organizations that public cloud is even relevant to them. HfS was reminded of this listening to a number of CIOs as recently as this week, expressing conservative opinions about cloud adoption. Opinions which included: public cloud was not for their core infrastructure, it only made sense for workloads with large swings in usage and that they feared lock in.

 

So where does this leave the market? And AWS? Clearly, public cloud services are gaining momentum as the platform of choice for new initiatives and AWS announcements around analytics and IoT should help fuel this adoption. These developments create additional opportunities for using cloud in this context. However, use of cloud for core and existing infrastructure is still about choice. AWS is making the decision to move more work to its public cloud easier, but there is still some way to go before it is a universally accepted no brainer. And arguing that cloud is not a commodity may not help with some people!

 

Additionally, as we look longer term the biggest impact of cloud will not be on IT infrastructure, but on the way applications are created and deployed. What is interesting about the cloud infrastructure story is its ability to allow fast ramp up and ramp down of vast technology stacks – giving agility to organizations that utilise technology and giving rise to new business models that take advantage of this flexibility. It is likely that over time a large number of IT departments will shift from their current infrastructure/operations centric model to an application centric one.

 

In particular we are seeing organizations taking current domain expertise and using it to create applications. For example, whilst at re:invent CIO of GE Jim Fowler said that by 2020 GE would generate $15 billion from software, making GE one of the top 10 software companies. With part of GE’s success based on its ability to design software, it has hired 2,000 IT staff and opened a software design center. This could impact application development providers as more organizations choose to forgo or insource external application development services, particularly where the software touches clients.

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