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Amazon's cloud faces new challenges in second decade

AWS turned 10 this month, and for the first time it faces the potential of real competition in a market that promises to be different in its second decade.

Amazon's cloud celebrated its 10th anniversary this month, but it faces a dramatically different landscape today...

than the one it helped to create a decade ago.

In March 2006, Amazon's cloud began to offer its Simple Storage Service (S3) and five months later Elastic Compute Cloud (EC2) was put into beta. Those services spearheaded cloud computing and made AWS the undisputed king of the market and a multi-billion dollar revenue stream for the company better known for its online retail business.

Now as Amazon's cloud kicks off its second decade, it's courting more enterprise workloads to take an even larger slice of the IT pie, and faces the first true signs of competition in a market that will likely look vastly different through the next 10 years.

There has been no shortage of companies that have sought to compete with AWS and later pulled back, from legacy vendors Dell and HP to managed hosting companies such as Rackspace. Smaller providers such as DigitalOcean continue to try to carve out a niche in the public cloud, while large-scale vendors including IBM and Oracle attempt to make inroads in this space. But in the past two years, two public clouds have emerged as potential alternatives to AWS: Google Cloud Platform and Microsoft Azure.

Of course, competition at this point is relative; AWS is at least twice as old as both platforms with double their combined market share. Nevertheless, while Azure and Google Cloud Platform are behind in scale, both are ramping up their rates of innovation and release cadences for new products, said Dave Bartoletti, principal analyst at Forrester Research.

"Crazy-fast innovation has kept AWS way ahead, and now they have smart, capable competitors," he added.

That competition has been good for customers -- and not only in the race to the bottom on infrastructure prices -- as Amazon's cloud has pumped out new services since Google and Microsoft arrived in the market. That's because Amazon is motivated to convince its customers to stay on the platform, as much as luring new customers off their legacy systems, noted Chris Moyer, a TechTarget contributor and vice president of technology at ACI Information Group, a Web content aggregator and AWS customer based in New York.

"Competition is good for everyone," Moyer said,. "I really hope they get some real competition."

All about the enterprise

Amazon secured its foothold with startups but has swung its focus to enterprise customers over the past several years. One of its top priorities is "crowbar-ing" all the core systems of record based on Oracle databases -- a move that will draw out the full force of Oracle, Bartoletti said.

AWS Database Migration Service, which was revealed last fall at re:Invent and became generally available this week, is key to bringing those customers onboard. The service is targeted at legacy on-premises systems such as Oracle, SQL Server, MySQL, MariaDB and PostgreSQL database.

One of Amazon's best advantages has been its willingness to listen to customers about their services, how it should be better or why they're not using AWS, Moyer said. Database Migration Service reflects both that shift to the enterprise customer base, and Amazon's response to concerns that it was simply too hard to migrate those workloads, he added.

Enterprise customers, and the large untapped revenues from these large organizations that are slower to move to the cloud, is an area where Amazon may face the steepest competition. In fact, it's an area where Microsoft, which has emerged as the next closest competitor, could thrive.

"Amazon definitely has integrated with enterprises, but I don't think it'll take much for Microsoft to catch up because they already have those long-standing relationships," said James Young, CTO at VidRoll, a Santa Monica, Calif., video technology and monetization platform for content publishers that uses multiple AWS resources.

Even Google, praised for its technology but largely seen as a distant third in the pack, appears to have made progress in expanding its customer base since bringing on VMware co-founder and former CEO Diane Greene late last year. Spotify uses AWS for streaming and storing content but will move the remainder of its on-premises workloads to Google -- and reportedly Apple now plans to use Google's storage as well for its iCloud service.

Google and Apple did not respond to requests for comment, and neither side has publicly acknowledged a deal. Apple also doesn't talk about its public cloud dealings with Amazon and Microsoft, though, in a whitepaper, it cited the use of S3 and Azure for backup.

"It's kind of a puzzler to us because vendors who understand doing business with enterprises respect NDAs with their customers and don't imply competitive defection where it doesn't exist," said an Amazon spokesperson in a statement.

Another Apple partner, IBM, could also pose threat to Amazon's growth plans in the future in the same vein as Microsoft, with its strong base of enterprise customers. Earlier this month, IBM rolled out a string of new cloud services and gave enterprises another big reason to jump on Big Blue with a partnership that allows VMware customers to migrate their workloads unmodified to its cloud.

It should be noted that multi-platform backup isn't unheard of in the public cloud. Even AWS poster child Netflix says it backs up data to Google's cloud.

Another challenge AWS faces with enterprises is that sometimes customers find public cloud is actually more expensive than running on-premises when the workloads become too big or if they're always running.

The most recent example is Dropbox, which stored billions of files in S3 but has spent the past two-and-a-half years migrating 90% of those files to its own multi-region private cloud for better performance and economics through its customized infrastructure built to handle an exabyte-scale storage system. Despite the move, Dropbox plans to continue to partner with AWS as it expands in Europe.

Because of its massive scale and availability requirements Dropbox may be more of an exception than a rule, and several major enterprises have even gone as far as to plan to move completely to the cloud. One of the more notable examples is Netflix, which just completed a seven-year migration by shutting down its last data center in February.

Despite the increased competition, Amazon customers say there isn't enough from the other vendors to jump ship any time soon.

"No one [else] offers every little piece all in one spot -- at least not yet," Moyer said.

Challenges and opportunities in the next 10 years

AWS users expect Amazon to continue to innovate. One area it hopes to see progress is integration of the various components that have been added and layered on top of each other over the past decade.

Lambda and its serverless framework, or even Google's new alternative Cloud Functions, could be the answer to that, said Erik Peterson, director of technology strategy at Veracode, a Burlington, Mass., a company that runs a cloud-based Web application risk assessment service that runs on AWS.

Vendors that view cloud as simply renting out virtualized servers will be left behind, as the successful providers take all the undifferentiated heavy lifting out of the equation, Peterson said. Lambda makes it easier to glue all the disparate IT pieces together and deliver applications that make a difference in business outcomes.

"When [Amazon] delivers its service without IT infrastructure having to worry about how to manage it, it's going to take off like wildfire," Peterson said.

VidRoll's Young was an early adopter of AWS and saw its full effect at Zynga Inc. where he helped develop the popular online game FarmVille. While other games would fail under demand, FarmVille was able to take off because it was built on Amazon.

"Facebook was this huge fire hose and Amazon was the only way to respond to it," Young said.

The challenge Amazon faces is that raw compute is becoming commoditized, with price becoming the only differentiator. Furthermore, containers have the potential to break the paradigm of vendor lock-in with the ability to deploy infrastructure as code, so Amazon needs to go farther, he added.

Amazon has invested heavily in building massive data centers around the world, but Young envisions a future where Amazon gets its services out to the edges via its Echo device to create a distributed, fault-tolerant network to extend its reach.

"Amazon can get there," Young said. "They're so close to a self-tuning network."

Trevor Jones is a news writer with TechTarget's data center and virtualization media group. Contact him at [email protected].

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