Amazon Web Services and the Large Scale Enterprise Space

In a December 2010 article titled “Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting”, Gartner positioned Amazon Web Services (AWS) as a visionary within its Magic Quadrant in the Cloud Computing Space. Within the “Visionary” category, Amazon was joined by GoGrid, CSC, Joyent and IBM whereas the “Leaders” box was occupied by Savvis, AT&T, Rackspace, Verizon Business and Terremark Worldwide. Gartner’s designation of AWS as a visionary was widely controversial given its first mover advantage in the cloud computing space, its dominance of cloud computing market share and the unparalleled depth of its features and functionality. In its critique of AWS, Gartner noted that Amazon lacked managed services that catered to the needs of customers who required customized management of data and applications that have been transferred to the cloud. Moreover, Gartner claimed that Amazon lacked colocation and dedicated non-virtualized servers, charged separately for items that are often bundled for free in the offerings of its competitors, and was fundamentally developer-centric, rather than enterprise oriented.

This article claims that Gartner’s criticisms about Amazon’s “lack of managed services” are misguided and reveal a fundamental misunderstanding of its business model and strategic objectives. On one hand, Gartner is right to claim that Amazon’s EC2 cloud computing service lacks managed services that provide enterprise customers with the personalized attention to which they have been accustomed when purchasing IT services from vendors such as IBM, SAP or Siemens Soarian. That having been said, Amazon’s cloud computing business model is designed to eschew the personalized attention specific to the procurement process and subsequent customized management of its cloud computing services. Amazon’s EC2 platform provides the most flexible, easily configurable, streamlined process for deploying software applications in the cloud computing space, today. In exchange for Amazon’s low pricing and array of applications for provisioning servers and associated applications with a few clicks of the mouse, enterprise customers will need to abandon the expectation that they will receive customized attention from their cloud computing vendor. Just as Wal-Mart bifurcated the department store experience into those stores that compete in price and those that offer customers personalized attention during the shopping process, Amazon intends the same in the cloud computing market: take advantage of its low pricing and bevy of applications for streamlining the deployment experience such as Hadoop, Elastic Beanstalk and CloudFormation, or go elsewhere. Gartner is right to claim that Amazon is fundamentally developer-centric, but it misses the reality that Amazon’s business model conflates developer-centric with enterprise oriented by providing large scale enterprises with unparalleled ease of deployment and application management experience. To repeat: for Amazon Web Services, developer-centric is enterprise oriented, but in a way that departs from the traditional model by which large-scale enterprises have been used to procuring IT services by receiving customized pricing, product demonstrations and walk-throughs for C-level stakeholders, negotiation about customized features and functionality, and customized management of services, post-signing. Instead, Amazon CEO Jeff Bezos, its CTO Werner Vogels and the rest of AWS’s executive team have thrown the ball into the court of C-level executives at the enterprise level and its development managers, daring them to take or leave the flexibility of its deployment platform and attractive pricing.

Our next postings will elaborate more on precisely how Amazon’s product functionalities and 2011 product roadmap simplifies and streamlines the development experience for large scale enterprises. We will examine Elastic Beanstalk, CloudFormation, its VMWare Plug-in, integration of Zeus Load Balancer and its premium support services in more detail.

Amazon Web Services (AWS): A Brief Introduction

Although Amazon.com began as an online retailer of books in 1995, it was not until 2002 that it entered the market for technology services with its Amazon Web Services (AWS) product. Today, Amazon Web Services is most pertinently known for hosting the Amazon EC2 (Elastic Cloud Compute) product offering as well as Amazon S3 (Amazon Simple Storage Service). Amazon EC2 was launched as a beta product on August 25, 2006 and since then, has progressed to dominate global market share for cloud computing services in the wake of competition from vendors such as the Google App Engine, Microsoft Azure, Rackspace, RightScale and Joyent. Amazon EC2 provides business subscribers with a pool of computing resources that can be configured and provisioned on demand by the subscriber. Amazon’s web-based services enable businesses to avoid expensive capital investments in IT hardware and its maintenance. Additionally, the EC2 product frees businesses from the obligation of term based subscriptions to web hosting environments that typically have fixed monthly costs and minimum term length subscription requirements. Amazon’s EC2 environment allows developers to pay only for system usage and consequently embrace a pricing structure that recognizes inconsistencies in system usage such as spikes in holiday sales or event driven website or application traffic. In 2010, analysts estimated that Amazon’s EC2 product offering earned between $500 and $700 million in revenue. Given that Amazon’s total 2010 revenue was approximately $34 billion, its AWS vertical represents a miniscule percentage of its total sales. Nevertheless, in the second quarter of 2010, Amazon CEO Jeff Bezos reported that Amazon was “seeing rapid growth in Kindle, Amazon Web Services, third-party sales, and retail,” thereby suggesting significant market uptake of the AWS line of business that is currently grouped into the “Other” category on the company’s balance sheet.