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Is AWS The Most Important Enterprise Company?

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As Amazon wrapped up its 4th annual AWS re:Invent Conference last week, it became clear to me that the company is no longer just a developer platform; but rather a full-fledged enterprise company serving the needs of small businesses to Fortune 500 companies.

AWS is dominating the public cloud market, and it is increasingly clear that this market represents the largest disruption of enterprise computing since the introduction of the personal computer.

To wit:

  • AWS is operating at a significantly larger scale than any of its customers are and, as a result, their costs for compute and storage can’t be matched.  Given the scale advantages they are able to invest in the latest and greatest hardware and infrastructure.In the end, even large enterprises can’t match the economics of running on AWS.It was particularly interesting to hear the Zynga guys — who left AWS several years ago to build their own infrastructure -– saying they essentially gave up and returned to AWS realizing the futility of running their own infrastructure.  As Amazon scales, this disparity will only grow driving more and more customers to their door.
  • Enterprise adoption seems to have gone mainstream.  Capital One, Hertz, AOL, John Deere, FINRA, etc. all were highlighted as major new enterprise customers.  Capital One’s keynote presentation was a prime example.  The core of Capital One’s customer facing applications are running on AWS and they presented compelling data as to why others will follow.That alone is interesting, but the fact that Capital One is a financial services company – the kind of company that wasn’t supposed to be adopting the cloud any time soon – shows just how far the cloud has come.
  • In spite of all the success to date, AWS continues to accelerate its incredible rate of innovation. They have launched over 500 product features this year and announced a number of major products at re:Invent alone.  They have a better understanding of the cloud, how people are using it and what customers want than any other player.At the point at which many companies begin to milk their customers and early products, AWS has managed to preserve a culture that values innovation and is certainly not interesting in resting on their laurels.
  • Lambda is a big deal, particularly because of what it signals about Amazon’s mindset.The event-based computing model introduced last fall received some major upgrades last week including support for Python, VPC, and longer function duration.  This serverless approach to building applications is a fascinating step forward and a further abstraction of underlying infrastructure.However, what’s particularly interesting is Amazon’s willingness to cannibalize their own EC2 business with a service that costs users a fraction of what they have historically paid.  AWS is playing the long game – no innovator’s dilemma here and that is a scary proposition for any would-be competitors.
  • Finally, AWS is no longer just an IaaS offering.  They are moving up their stack, leveraging their relationship with customers and skill in operating cloud services to build user-facing applications.  For instance, Amazon announced a BI product, QuickSight, this week.This is a product for end-users and not just developers.It isn’t a surprising move, but one that is rattling the cages of the companies that are built on top of Amazon.  I think it will be a while before Amazon gets these products just right, the first version of these products are pretty raw and lack key features, but it signals that AWS isn’t content with just infrastructure-as-a-service.

AWS is on a $10B run rate growing at 81% year over year.  They have thriving businesses in compute, storage and databases with emerging businesses in a range of areas across the enterprise software spectrum.

According to Baird, AWS will represent just 5% of data center spend this year and less than 1% of overall enterprise IT spend.  In other words, there is still significant room for growth as more enterprises embrace cloud technologies.  AWS’s scale advantages coupled with an impressive track record of innovation and huge aspirations have the company extremely well positioned for the next decade.

As a the conference wrapped up, rumors of Dell’s interest in buying EMC and their controlling interest in VMware hit the newswire.  EMC, the stalwart of on-premise enterprise storage, and VMware, the creator of virtualization and champion of server and data center consolidation – two of the most successful companies in data center infrastructure over the past decade – are on the block with their best days clearly behind them.

In contrast, AWS is ascending and dictating the corporate strategies of nearly all major enterprise IT vendors.  While Microsoft, IBM, et al have great assets to challenge in this market, it is clear that Amazon is driving the agenda for enterprise computing and is the most important enterprise IT company in the world today.