Updated: As wildly successful as Amazon(s amzn) Web Services have been, there’s still a lot of noise about how big enterprises don’t want to put their precious workloads on this public cloud infrastructure. The Amazon cloud is not safe or reliable enough for these important workloads, some say.
Here’s a news flash: Big companies may or may not be wary of Amazon’s cloud, but they’re already using it. And this despite multiple snafus at Amazon’s US-East data center complex in the past year. It’s a pretty safe bet that virtually every Fortune 1000 company is running workloads beyond test and dev in Amazon’s cloud and that means trouble for incumbent IT providers like IBM(s ibm), HP(s hpq), Dell(s dell) and others which are scrambling to respond.
Case in point: Cloudyn CEO Sharon Wagner, whose company helps businesses make best use of AWS, told me that 30 percent of its AWS customers are large enterprises. And while their applications vary, they do include business-critical workloads, and not just development and testing, he said.
Ken Ziegler, CEO of Logicworks, a New York City-based cloud computing and managed hosting provider, agreed that big accounts aren’t just fooling around with AWS.
“Many of the most cited barriers to cloud adoption have been addressed at this point and it’s getting more difficult for territorial IT decision-makers to defend managing infrastructure in-house. You’d be surprised just how many companies have already made the move. It’s not just Netflix.”
Amazon is pressing its first mover advantage to reinforce the notion that it is “the” brand in cloud. “As Kleenex is to tissue, Amazon is to cloud,” Ziegler said. To capitalize on that sentiment, Logicworks this week launched a new managed service that will enable it to manage business customers’ AWS deployments.
Over the past year, AWS unveiled an array of more enterprise-like support and service options. Expect Amazon execs — including CEO Jeff Bezos (pictured above), AWS Senior Vice President Andy Jassy, and CTO Werner Vogels to talk more about this market at the AWS Re:invent show next week in Las Vegas. The show also flaunts a pretty robust enterprise IT conference track. The timing is good: An array of competitive public cloud offerings are now coming online from Rackspace(s rax), Hewlett-Packard (s hpq), and others.
AWS girds for more competition
Amazon is nothing if not proactive. Just as it rolls out services before announcing them, now it’s prepping for more intense competition for enterprise workloads. Rivals say they are better suited for enterprise needs than Amazon. Rackspace says its customer support sets it apart; HP says its enterprise service level agreements (SLAs) will win enterprise customers over.
Sources say that Amazon now offers special deals including discounts to enterprise companies doing as little as $250,000 a year in AWS business. Six months ago, it only offered such deals to companies doing at least $1 million of business annually. Why the change now? One thing that IBM and HP have that Amazon does not is long-term ties to big customers.
Amazon did not respond to requests for comment on its discounting practices.
Update: An Amazon spokeswoman got back to me after publication to say that the company introduced volume discounts for Reserved Instances (RIs) last March. If the customer owns more than $250,000 worth of such instances, it qualifies for a 10 percent discount on additional RIs — with the discount applicable to both the upfront and usage pricing. Customers owning more than $2 Million of RIs, qualify for a 20 percent discount on new RIs. If they surpass $5 Million in RI purchases, they can talk to Amazon about further discounts.
Said one AWS partner: “AWS feels that IBM entering with SmartCloud and HP with its public cloud may take away enterprise customers because [those older vendors] have much better relationships with them.” Developments like Telefonica’s joint public cloud offering with Joyent is also a problem for Amazon given that telcos also have tight enterprise relationships and telcos “own the network edge,” he said.
A stealth attack on enterprise IT
Some AWS partners said the company prefers to work under the radar in general and that stealth mode hid what they say is an escalated enterprise sales push. AWS has hired sales engineers and others from enterprise-focused companies like HP, SunGard and EMC(s emc).
“One of the senior AWS guys told us ‘we like that our competitors don’t think we’re active in the enterprise. When they find out it’ll be too late,'” he said.
One thing’s for sure, Amazon has a huge head start in public cloud services. The total net sales attributed to the company’s “other” category –which largely consists of AWS — were $608 million in Amazon’s third quarter ending September 30. For the nine months preceding that, “other” sales totaled $1.582 billion. So to say AWS is now a $2-billion-a-year business is not a stretch.
Amazon’s problem is that it’s had that field much to itself so far. That won’t be true going forward.