Amazon SVP Says Outlook for Enterprise Datacenters Is Cloudy 

Amazon Web Services doesn't see the world the same way that most system makers do, Andy Jassy, senior vice president of the cloud computing arm of the retailing giant, explained in his keynote address at the re:Invent conference in Las Vegas.

Those who peddle systems for a living think that companies will continue to build datacenters and buy lots of iron, with a portion of their workloads bursting into public clouds. That is not what Amazon thinks will happen.

"I think that the old guard technology companies believe that what enterprises want is to run most of their workloads on premise behind the firewall, and then they just want to have a little bit of ability to surge to the cloud," explained Jassy.

"We have a very different view of that. We believe that in the fullness of time that very few enterprises are going to own their own datacenters, and those that do will have much smaller footprints than they do today. That informs our approach to what we are building in this hybrid world. We are going to meet them where they are now, but we are going to prioritize for those workloads to where their future homes will be."

Jassy poked a little fun at IBM and its claims that it has a larger cloud business than Amazon. Big Blue has been running ads touting the fact that it has 270,000 more Web sites hosted on its SoftLayer cloud than Amazon has, but this is not a reasonable comparison. Before IBM acquired SoftLayer in June, that company had something on the order of a $340 million annual run rate, and AWS is estimated to have somewhere around $2 billion. Amazon has hundreds of thousands of customers, and SoftLayer has 21,000. To be fair, many of them are development environments or small startups, but as AWS proves, it adds up.

Amazon has never given out a precise number of customers that are using the AWS cloud, and it has similarly not talked about how many large enterprises, who might otherwise buy racks and racks of iron, have moved some of their workloads to AWS. But the demographics of the crowd of 9,000 who attended re:Invent perhaps provide some clues. Jassy said that about a third of them were startups, a third were small and medium businesses, and a third were large enterprises. Among those customers are also over 600 government agencies and 2,400 academic institutions. Thousands of systems integrators, including the incumbent giants like CapGemini, Cognizant, Accenture, Booz Allen, Infosys, and Wipro as well as smaller startups who have built expertise specifically for clouds, are helping companies move applications to the cloud. There are also thousands of independent software vendors who have made their own applications available on the cloud.

By any measure, AWS is a platform as much as any system – the combination of hardware and systems software – that IBM, Hewlett-Packard, or Oracle/Sun Microsystems put into the field in the past two decades.

There are a number of different reasons why enterprises are coming to the AWS cloud. The first is the unrelenting pace of innovation to being out new features and services. In 2010, Amazon introduced 61 significant services for the AWS cloud, building on top of the basic EC2 compute and S3 and EBS storage services. In 2011, 82 new services came out, followed by 159 in 2012. To date in 2013, Amazon has 235 new services, and it is not yet done for the year. "The pace of innovation is accelerating within AWS," says Jassy.

The breadth of the cloud is also matched by its depth, with eight different regions around the globe offering massive amounts of compute and storage capacity, plus the GovCloud facility for US Federal government agencies. All told, they have 25 availability zones, which are physically and electrically isolated from each other for redundancy. Amazon also has 46 network edge locations on its CloudFront content delivery network to be able to push cached content very close to users in metropolitan areas around the globe.

The other factors driving AWS adoption are cost and agility. "Cost is often the conversation starter when people think about moving to the cloud," says Jassy. "If you don't have to lay out all of that capital in advance, that is a big advantage." Jassy also claimed that AWS costs less for a given service than what most IT shops can deliver themselves – something that many IT departments would argue about. Most enterprises running big jobs on AWS use reserved instances for their steady state work and then use a mix of on-demand and spot instances, which have lower costs but which are not always available, to do other work that can afford to wait. This is something that an internal IT shop cannot do, since it has to buy and install physical resources.

AWS senior vice president Andy Jassy

The disparity between the price AWS can offer a service for and what an IT shop can do would seem to be widening as AWS gets bigger. "You have opportunities to spin that flywheel faster, as you have a larger ecosystem to help customers move into the cloud, as you have a larger global footprint, as you add more services and features so customers can do more, as you invent and innovate in the infrastructure – all of those activities spin that wheel faster."

This is how Amazon has been able to lower prices 38 times since AWS was first introduced in March 2006 with the EC2 compute service. Cost savings goes even further than this, however. Amazon launched its Trusted Advisor as a beta in early 2012 and put it into production earlier this year. In that time, AWS has sent over 1 million notifications out to customers explaining how they could tweak their capacity to save money – shifting some work to other instance sizes or moving from reserved to on-demand or spot instances, for example. Customers have accepted over 700,000 of those recommendations, and have collectively benefitted from $140 million in annualized savings by taking Amazon's advice.

"I ask you: How many technology companies call up the customer and ask them to spend less money?" Jassy asked rhetorically. The answer, of course, is zero. Unless you consider AWS a platform provider in its own right. Perhaps others will follow Amazon's lead.

Established enterprises are getting to the AWS cloud in a number of different ways, and Jassy outlined them. For many customers, moving their application development and test environments to the cloud is a first step, much as it was for server virtualization a decade ago. In other cases, companies are developing whole new applications that run only on the cloud, and in others, they are extending existing applications running in their datacenters out to the cloud, usually by adding analytics functionality to them. In other cases, companies are migrating existing applications to the cloud, either by lifting and shifting them or by finding alternatives that are already certified to run on AWS.

And then there are those who are going all in, like Netflix did when it moved its movie and TV program streaming application from its own datacenters to AWS a few years back. Today, AWS has tens of thousands of EC2 instances running in multiple regions and availability zones, running hundreds of Amazon services and hundreds of Netflix applications to feed entertainment to its 33 million subscribers. Others are following the example set by Netflix.

One such company which spoke briefly at re:Invent is Suncorp Bank, a financial services company that operates in Australia and New Zealand and is the fifth largest bank down under. Jeff Smith, CEO of the Suncorp Business Services division of the bank, explained that when you start analyzing your workloads for what can be moved, you end up spending a lot of time talking about what can't be moved. "When you spend a lot of time talking about what can't be done, that's waste," explained Smith. "So we made a bold and brilliant decision to say we are going to move everything."

That was three months ago. In the first month, Suncorp put together a business continuity plan and got board approval to do the move to the cloud. In the second month, it lined up the risk mitigation, security, and legal approvals for the move, briefed banking regulators on what it was doing, and put its governance and compliance into place. In month three, Suncorp migrated its data streaming, business intelligence analytics, and several Web applications over to AWS, and the plan is to migrate the remaining 2,000 applications in Suncorp's datacenters over to AWS in the next 15 months.

"Aim for success, not perfection, because if you don't you will miss your opportunities in life," Smith admonished the AWS crowd.