Amazon Broadens Cloud Services as Big Companies Sign On
November 28 2016 - 12:40AM
Dow Jones News
SEATTLE–Amazon.com Inc.'s first cloud-computing conference in
2011 was a curiosity. Many of its 6,000 attendees worked for
startups that had chosen to buy access to processing power and data
storage via the web from Amazon Web Services rather than own and
maintain their own data centers.
With the fifth Amazon Web Services re:Invent conference set to
start Tuesday in Las Vegas, the cloud-computing revolution that AWS
largely pioneered has upended the world of corporate information
technology, displacing on-site servers, storage, networking and
software with more economical web-based alternatives. The company
expects more than 32,000 people to attend the conference, said AWS
Chief Executive Andy Jassy.
While sales growth slows or even reverses at traditional
hardware and software giants, sales of Amazon's subscription-based,
on-demand services ballooned 55% in the third quarter to $3.2
billion. The quarter's rise was fueled not only by startups but
also by big companies including Unilever PLC, Merck & Co.,
Coca-Cola Co. and Capital One Financial Corp., according to
Amazon.
And the list is growing. Amazon is expected to announce on
Monday that shipping company Matson Inc. has closed its four data
centers and moved core computing operations to AWS. The
Honolulu-based company expects the shift to slice its
information-technology operating costs in half, freeing up money to
invest in innovations that might spur its business, said Peter
Weis, Matson's chief information officer.
Large companies need a wider array of services than AWS's core
computing and storage offerings. For them, Amazon has, in industry
parlance, moved "up the stack," building layers of software on top
of its basic platform, from programming commands that help
companies build customized services to full-fledged applications.
The company has added databases that can handle many different
types of data and programming tools that automate allocation of
computing resources.
"We're not close to being done adding new capabilities," Mr.
Jassy said in an interview here last week. "When we look at areas
that we choose to participate in a little bit further up the stack,
they are almost always in areas that our customers are demanding us
to get involved in."
New offerings aren't just a way to attract new customers. They
create a "gravitational pull" that makes it more difficult for
customers to switch providers, said Gartner Inc. analyst Lydia
Leong. Applications built on specialized AWS services may not be
easily portable to other vendors' services.
Many of these services are supplied by business partners who
charge AWS customers for access to their own corners of the
platform. The challenge for AWS is to meet the needs of its big
customers without encroaching on its partners' offerings.
Amazon isn't the first tech company to wrestle with striking a
balance between satisfying both customers and partners. As
Microsoft Corp.'s Windows operating system came to dominate the
market for personal-computer software, it added features that
sometimes undermined the business of application vendors. That led
to regulatory scrutiny and litigation.
One distinct difference, however, is that Amazon, unlike
Microsoft, stands to make money when AWS customers use partners'
services. Microsoft customers until recently paid only once for a
Windows license, but AWS customers pay more as they spend more time
on the platform.
"Andy is doing a better job than I did, in part because the
business model is different," said Bob Muglia, a former Windows
executive who now serves as CEO of Snowflake Computing, a
data-warehouse service that customers use to analyze stored
information. Snowflake both runs on AWS and competes with Amazon's
Redshift service.
As the market matures, Mr. Muglia expects to see Amazon compete
more with what the company calls its "ecosystem partners."
Mr. Jassy said the market is evolving so fast that there is
plenty of opportunity to offer differentiated services. "What most
ecosystem partners realize is that, if they built substantial
functionality on top of our platform, our merely offering something
in that space is not going to have a meaningful impact on them," he
said.
In the past, Amazon has used re: Invent to introduce new
services. Mr. Jassy declined to disclose Amazon's plans for this
week's conference. He also didn't comment on speculation that the
company will unveil another database offering as well as new
capabilities in the hot area of artificial intelligence known as
machine learning.
It is likely, though, that any new offerings will be designed to
appeal to large corporate customers such as Matson. The shipping
company uses only AWS's basic computing and storage services,
partly to keep its options open in case it wants to switch
providers, Mr. Weis said.
But he is intrigued by the possibility that Amazon might offer a
version of PostgreSQL, a database service popular with big
companies. "I don't think we'll go anywhere, and we'll probably use
more of their tools," he said.
(END) Dow Jones Newswires
November 28, 2016 00:25 ET (05:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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