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Amazon’s growing threat to Hp, Dell and Oracle
Amazon becoming major low-priced player in corporate IT world
By Rex Crum,
Amazon bringing cloud to The CIA
In March, the trade magazine FCW reported that Amazon’s Web Services business landed a multimillion-dollar deal with the CIA to build a private cloud service for the agency. MarketWatch’s Dan Gallagher on why this could be a big step for the company’s AWS unit.As such, Amazon has quickly become a significant force in the market for corporate IT services, where it now competes against big technology names like Hewlett-Packard Co. HPQ -0.09% , Dell Inc. DELL -0.04% and Oracle Corp. ORCL +0.93% — to name a few.
Just last week, Andy Jassy, senior vice president of Amazon Web Services, gave attendees at an AWS Summit in San Francisco an example of how much AWS has grown in the market for cloud-based data storage.
“If you look at how much new server capacity that AWS is delivering every day, it would have handled all of Amazon globally back in 2003, when we were a $5.2 billion business with 7,800 employees,” Jassy told the crowd. “That’s a lot of data centers.”
That business is still relatively small compared with Amazon’s massive retail operations. The company doesn’t disclose exact revenue figures for AWS, but when Amazon reported its first-quarter results on April 25, the company listed what it called “other” revenue of $798 million. Analysts widely believe that AWS comprises the large bulk of the “other” category, and total revenue from that segment was up 60% in the first quarter.
By comparison, Amazon’s $16.07 billion in total revenue for the quarter rose 22% over the same time.
Perhaps most importantly, the AWS business offers the promise of much higher profit margins at a time when Amazon has virtually trained investors to expect ultralow margins on its traditional online retail business. That is considered one of the main reasons behind the company’s push to disrupt the cloud computing industry in much the same way it upended markets for books, consumer retail and even tablet computing.
“The company has sped up the rate of Web services releases in the first quarter,” said Jillian Mirandi, cloud computing analyst with Technology Business Research. “We think AWS will see increased growth over 2013 due to an expanded portfolio [of cloud computing services], and the maturing of the public cloud market.”
With the growth of AWS, Amazon has become an alternative to the traditional big iron server and data-storage technology providers such as H-P, Dell, Oracle, International Business Machines Corp. IBM +0.63% , SAP AG SAP -0.57% , EMC Corp. EMC -0.08% and NetApp Inc. NTAP -2.12% .
Brian Marshall, of ISI Group, told MarketWatch that AWS’s storage offerings “will commoditize the crap out of servers, and will cannibalize some storage opportunities for EMC and NetApp, in particular.” But he added that, at least for now, he doesn’t see a huge rush of companies abandoning what they have to let AWS run their cloud environments.
“It’s way overblown today,” Marshall said.
Not all agree. Last month, a team of analysts at Robert W. Baird issued a broad report, predicting that Amazon’s AWS business will “catalyze a substantial and accelerating shift in the technology landscape,” as money deployed by corporations to cloud services represents sales lost to traditional IT vendors.
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