Amazon: Enterprises should adjust cloud expectations
A contract negotiation between Amazon and Eli Lilly highlights some growing pains in cloud computing
The reported problems Amazon had last week in negotiating a contract with Eli Lilly point to a disconnect between what cloud providers offer and what large enterprises expect -- though some analysts say they also reflect a lack of flexibility at Amazon.
Last week reports surfaced indicating that Eli Lilly, a marquee customer of Amazon's Web Services, had decided against expanding its use of the hosted services after the companies failed to agree on liability terms. Some analysts have concluded that Amazon is essentially unwilling to negotiate contract terms and may not be serious about targeting enterprise customers.
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Amazon has declined to comment on the specifics of its contract with Eli Lilly but said that the pharmaceutical company continues to be a customer of Amazon's Web Services and that both companies are pleased with their current relationship. Eli Lilly also confirmed that it continues to employ a variety of Amazon Web Services.
In an interview, the head of Amazon's Web Services said that the company does negotiate contract terms with enterprises and is interested in attracting customers of all sizes. He also said that large companies may need to adjust their expectations when starting to use the cloud.
"We absolutely negotiate enterprise agreements with enterprises who want something more tailored" than the stock customer agreement that Amazon offers on its Web Services sites, said Adam Selipsky, vice president of Amazon Web Services.
While many such negotiations conclude swiftly, a "subset" doesn't, he said. "What's happening is, in some cases customers who are not yet comfortable are coming with very risk-averse profiles and therefore some contractual requests which, frankly, they aren't making with their traditional vendors," he said.
Many enterprise customers are used to buying technology resources under fixed contracts that include substantial up-front investments, he noted. If a company is doing a contract that will cost hundreds of millions of dollars over a decade, "in some cases you'd see significant liability provisions in place," he noted.
"To then move to a world where these IT resources are consumed simply on a pay-as-you-go basis with no up-front commitment, no capital expenditure required ... in situations like that, consumers of these services and vendors need to have liability arrangements that make sense in that environment," Selipsky said. "It's a question of different environments and different arrangements being appropriate given the particulars of each situation."
While Amazon believes that its position on liability and other contractual terms is similar to its competition, it also notes that it's difficult to be sure. Experts say that Amazon is different from its competitors.
"This kind of underscores the weakness of Amazon versus third-party hosting companies who are able to offer rock-solid service agreements," said Phil Shih, an analyst with Tier1 Research. "I feel this is clearly a prime example of the difficulties it will encounter trying to push into the enterprise."
