AWS is still a minnow -- but it makes big waves

As Amazon Re:Invent convenes this week, AWS claims $3.2 billion in revenue for its latest quarter, still a drop in the multi-trillion-dollar bucket of IT spending

AWS is still a minnow -- but it makes big waves
Credit: US Fish & Wildlife Service

Amazon Web Services may no longer surpass 10X the utilized capacity of its next 14 closest competitors, thanks to a booming Microsoft Azure and signs of life at Google, but it's still the $10 billion-plus gorilla in cloud computing. Ironically, this makes it a mere minnow in the grand scheme of enterprise IT. The overall IT market surpasses $4 trillion, with cloud (IaaS, SaaS, PaaS, and so on) accounting for only 10 percent of the total, as Apprenda executive Joseph Jacks reminds us.

Despite this relatively diminutive size, AWS is making waves. As Expedia's cloud vice president Subbu Allamaraju makes clear, "You don't need to own datacenters unless you're special." Where does that leave most enterprises? Nope. They don't count as special.

AWS, then, is perfectly positioned to drive a wave of new IT spending, casting it as the most disruptive enterprise vendor around, whatever its comparative size.

Private cloud: No, you really shouldn't

People don't like change, particularly if it threatens their livelihood. As such, it's not surprising to see so much money thrown at the private cloud in an attempt to ward off the future.

Allamaraju, who runs Expedia's cloud strategy, has some advice for people stuck in such thinking: Don't. After both building a successful private cloud and working with Expedia to migrate mission-critical workloads to the public cloud, Allamaraju came to this conclusion: "Slow down on your private cloud projects, and get out of enterprise datacenters as fast you can."

Why? Because, it turns out, most enterprises lack the ability to run a private cloud at scale. To be clear, for those enterprises not running applications at massive scale, Allamaraju goes on to argue, there's simply no point in owning their servers: "Unless you've at least 200,000 servers in multiple locations or you're in specific technology industries like communications, networking, media delivery, power, etc., you shouldn't be in the datacenter and private cloud business. If you're below this threshold, you should be spending most of your time and effort in getting out of the datacenter and not on automating and improving your on-prem datacenter footprint."

This is how he diagrammed the right way to think about the problem:

data center vs. public cloud Subbu Allamaraju

Even more than hardware, Allamaraju argues that it's imperative to move to the public cloud because of what it does to company culture: "The state of infrastructure influences your organizational culture. A modern enterprise running on programmable cloud contributes to autonomous teams, rapid learning, and faster iterations of ideas."

If you want to move fast, in other words, you have to stop doting on your precious infrastructure.

Enter the Amazon

Which brings us to AWS and the opportunity before it: As more companies figure out that they really (really) don't need to own their infrastructure, AWS keeps capturing more revenue. This isn't necessarily a transition from private to public clouds, as Jacks suggests, but rather "a wave of MORE compute consumption." In other words, the public cloud isn't necessarily eating existing private cloud workloads, but instead enabling future ones.

Not that AWS doesn't also want a healthy chunk of the existing market -- as Amazon executives said on the company's most recent earnings call, "We continue to invest in AWS on behalf of our customers in addition to the technologies that make integrations easier that helps companies move from an on-prem or a hybrid IT environment into AWS."

Even so, most of the growth in public cloud isn't coming at the expense of old-school workloads, but rather enterprises building their future on new-school public clouds. Gartner analyst Thomas Bittman highlighted this trend back in 2015, showing the massive disparity in growth between private cloud and public cloud VMs: 3x vs. 20x, respectively. As he wrote, "There are certainly examples of new cloud-friendly instances in private clouds, and examples of traditional workloads migrated to public cloud IaaS, but those aren't the norm. New stuff tends to go to the public cloud, while doing old stuff in new ways tends to go to private clouds. And new stuff is simply growing faster."

To wit, this week at AWS Re:Invent we're likely to see Amazon introduce new products and functionality around the internet of things, serverless computing (Lambda), databases, and containers, most of which will focus on enabling those new workloads. Will they make a ripple in existing enterprise IT revenue? Not so much, but you can bet they'll help to propel the increasing waves of change that will continue to push the future of enterprise IT into the public cloud.

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