Enterprise computing is moving to the cloud, but few seem to appreciate just how profoundly this shift will destabilize the traditional vendor landscape. Gartner projects enterprise software to top $232 billion in global revenue in 2010, and it’s safe to assume that the Oracle (s orcl) and IBM (s ibm) crowd expect the lion’s share to land in their pockets.
Not so fast. Lost in the hype around cloud computing is the very real possibility that the company doing so much to enable it just might take a massive share: Amazon (s amzn).
This thought hit home for me while I was reading Redmonk analyst Stephen O’Grady’s excellent post on Amazon’s quiet revolution:
If Amazon restricted itself to basic public cloud computing services, that would be one thing. Most of the large systems players have turned their attention to the burgeoning market for quote unquote private cloud services. Whether these same cloud players appreciate the fact that a large portion of their interest in the private cloud is a function of the public cloud economic realities established by Amazon is unclear, but unimportant. Amazon is singularly responsible for the framing that is the public cloud today, a framing which generally relegates those with traditional enterprise margins in mind to private cloud settings.
But Amazon has not, of course, restricted itself to basic public cloud computing services. Amazon’s steady but underacknowledged expansion into adjacent markets is no secret. Since those early days when it took a Master’s degree to apply DNS to a running EC2 instance, Amazon has steadily grown its footprint beyond basic compute and storage functions into core enterprise software markets like messaging (SQS, SNS), analytics (Elastic MapReduce), monitoring (CloudWatch), and databases (SimpleDB, RDS). And, as of last Tuesday, enterprise Linux.
Amazon, in short, is an enterprise software company. It just doesn’t look or act like Oracle (s orcl), IBM (s ibm), or VMware (s vmw), so it gets treated as a side-show oddity when, in reality, it’s playing center stage. In many ways, it’s orchestrating the industry as a grand puppet-master, as O’Grady implies, and in the process, may end up disrupting established ways of doing business.
Amazon has started with infrastructure, virtualizing and delivering key components of enterprise data centers like databases, storage, and now Linux through its public cloud. In doing so, Amazon is not only shaking up outmoded delivery models like Microsoft’s (s masft) Windows, but also new approaches like Red Hat’s (s rht) Red Hat Enterprise Linux, as IBM’s Savio Rodrigues points out in his post over at InfoWorld.
Amazon is happy to effectively give away others’ businesses. As O’Grady illustrates, the entire reason we hear so much noise about private clouds from IBM, Oracle, VMware, Red Hat, and the like is that Amazon has effectively decimated their ability to make serious money in the public cloud.
So what happens when Amazon dismantles this wishful thinking and pushes all computing to its public cloud?
Such a move would naturally begin by Amazon getting enterprises comfortable running their applications on Amazon Web Services: companies like Pfizer (s pfe). Sure, today they insist they’d never run everything in the public cloud and, in fact, Eli Lilly (s lly) is an example of a company that has pulled back from AWS due to liability concerns. Clearly, it’s going to take time to get enterprises comfortable running their businesses on the public cloud.
But let’s get this straight: It’s just a matter of time. Salesforce.com (s crm) proved enterprises will put their most sensitive data — their customer data — in the cloud. It’s unclear why a vast array of other applications and associated data would be any different.
Applications drive strategic value — and IT purchasing dollars — making it almost certain that Amazon’s support for infrastructure like Linux and MySQL is simply a way to enable the next round of its cloud strategy: application support. Over time, it’s hard to not see Amazon competing with the likes of Salesforce.com and Google (s goog) in the cloud/SaaS-based delivery of enterprise applications.
So, today, Amazon is increasingly competing with the open-source vendors who sell support for a variety of open-source components of its Amazon Web Services offering. In the future, I expect we’ll see Amazon building out its AWS product portfolio in ways that make just about everyone in the traditional software market uncomfortable. Very uncomfortable.
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