& cplSiteName &

No Crocodile Tears for AWS Just Yet

Carol Wilson
7/28/2014
50%
50%

If you were one of the folks in the cloud computing industry who spent the weekend celebrating the downturn in Amazon's financial results and their reflection on Amazon Web Services, this is Hangover Monday. And here's your real headache: It turns out Amazon isn't doing all that badly after all.

The company admitted to sinking margins in reporting a second-quarter loss of $126 million, and a big chunk of that is attributed to price wars in the cloud computing segment. Amazon Web Services Inc. has cut its prices between 28% and 51%, due to competitive pressures, and that is helping squeeze its margins. Some folks are saying this amounts to an AWS crisis and are questioning the company's ability to respond, given all the things that parent Amazon.com Inc. (Nasdaq: AMZN) is currently attempting to tackle.

John Dinsdale, chief analyst and research director at Synergy Research Group Inc. , issued his quarterly report today, and admitted Amazon is no longer as dominant in the cloud computing space as it has been. But in a follow-up email exchange, Dinsdale characterized Amazon's woes as "champagne problems" that most companies would love to have.

"It is continuing to invest and to roll out new services and is building increasing levels of credibility within the enterprise market," Dinsdale notes. "In its earnings material, it pointed to 90% growth in AWS usage over the last twelve months, so there is plenty of customer momentum behind AWS."


Our NFV & the Data Center event digs deeper into how telecom service providers are evolving their data center strategies. You can check it out here on Light Reading.


Dinsdale's research shows Microsoft Corp. (Nasdaq: MSFT) and IBM Corp. (NYSE: IBM) are the two companies gaining the most against Amazon. But Google (Nasdaq: GOOG) is not quite keeping up, largely because it doesn't have the enterprise connections that Microsoft and IBM have by virtue of their software, computing and integration businesses.

"I think the biggest issue that Google has to face is that it does not have an established presence and credibility in the enterprise/business sector," Dinsdale says. "IBM and Microsoft do and they can leverage that. Amazon didn't but it is benefiting from being the first to market and staying in front of the pack – so it has built the scale and now has credibility with enterprise customers."

Synergy is estimating that the cloud infrastructure service market hit $3.7 billion in revenues in the past quarter, with the total market growing at greater than 45%. AWS and Google have about the same market share they had a year ago, while both Microsoft and IBM have increased market share, as shown below.

Amazon is definitely facing some tougher competition, Dinsdale notes, and can no longer claim to be bigger than its four largest competitors.

But where does all of this leave the telecom cloud players? Many of them have taken aim at AWS in particular. Synergy shows they are growing but still lack the scale to be among the market leaders. They are also having problems moving outside their traditional network footprints into a position of global reach. (See Verizon Looks to Bridge Amazon, CenturyLink Cuts Cloud Prices, Touts Power.)

"The leading telcos are still, in essence, national players that have a hard time growing substantial business beyond their home country or companies that are headquartered in their home country," Dinsdale comments in his email.

Synergy shows NTT Group (NYSE: NTT) as the leading telco cloud provider, ranked eighth overall in the market, with Deutsche Telekom AG (NYSE: DT), AT&T Inc. (NYSE: T), Verizon Enterprise Solutions , Salt SA , BT Group plc (NYSE: BT; London: BTA), and CenturyLink Inc. (NYSE: CTL) making the top 100 list.

— Carol Wilson, Editor-at-Large, Light Reading

(5)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Joe Stanganelli
50%
50%
Joe Stanganelli,
User Rank: Light Sabre
7/29/2014 | 11:13:02 PM
Re: Microsoft Margins
I don't even understand the "rooting" for Google.  Google already controls so much of our lives and invades our privacy in ways that make Facebook look like Diaspora.  Do we really want them to dominate the cloud market too?

Rather, I'm rooting for someone to come out with a search engine that is better than Google's.
Joe Stanganelli
50%
50%
Joe Stanganelli,
User Rank: Light Sabre
7/29/2014 | 11:09:53 PM
BAA BAA, black sheep.
Word on the street at a conference I attended a few months ago in Boston is that part of the issue is that Google still isn't offering BAAs for many of its services, which makes it less palatable to customers in markets with burdensome data compliance issues (e.g., healthcare, finance, etc.).
Liz Greenberg
50%
50%
Liz Greenberg,
User Rank: Light Sabre
7/29/2014 | 1:33:12 PM
Re: Microsoft Margins
@burn0500, Google and IBM really aren't paying for their software either.  Realistically, it shows that there is a lot of room from growth in the cloud market and that those who can give great service and great prices will have customers.  Customers will probably choose not just based on price but on SLA, distribution and other metrics that make sense to each company.  It is good to see the competition here.  Keeps everybody honest and gives the customer a lot of choice.
kq4ym
50%
50%
kq4ym,
User Rank: Light Sabre
7/29/2014 | 1:30:59 PM
Re: Microsoft Margins
Even if the competition gets fierce Amazon is still in a great position. Whether Amazon can survive it's retail side without profit is another matter. But, as pointed out, AWS is ready for our sympathy quite yet.
burn0050
50%
50%
burn0050,
User Rank: Light Bulb
7/29/2014 | 10:48:24 AM
Microsoft Margins
Looks like when you don't have to pay for licenses for your own software, it makes cloud very profitable!
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Scania's CEO on Making IoT Pay

2|28|17   |   05:35   |   (0) comments


Henrik Henriksson, CEO of Scania, talks about how the introduction of IoT technology, developed with Ericsson, is helping the truck giant's business and that of its customers.
LRTV Huawei Video Resource Center
You Mobile Enhances Customer Experience With Huawei BSS

2|28|17   |     |   (0) comments


James Weng, CEO of You Mobile, shares the experience of enhancing customer experience in Spain and trying to establish the best Chinese community based on Huawei BSS.
LRTV Interviews
Ericsson's CEO on 5G, Trucks & More

2|28|17   |   04:57   |   (0) comments


At MWC 2017 Ericsson CEO Börje Ekholm talks about early 5G developments, the importance of partnerships and more.
LRTV Custom TV
Introducing OrbTV: Netscout's MWC Day 1 Recap

2|27|17   |   8:35   |   (0) comments


The executive team of Netscout reviews the first day of Mobile World Congress in Barcelona. Stay tuned for OrbTV -- Light Reading and Netscout's full coverage of the show. We'll have daily show recaps, service provider interviews and tours of the show floor.
LRTV Custom TV
Innovation at MWC: Low-Power IoT for Scottish Sea Lions

2|27|17   |   6:32   |   (0) comments


Light Reading's Liz Coyne tours the GSMA's Innovation City at Mobile World Congress 2017. A key theme of this year's event is how low-power or no-power IoT devices could become a part of our everyday lives. Imagine a world in which over 15 billion shipping pallets communicate with cellular networks down the entire supply chain. Or a parka that reveals your ...
LRTV Huawei Video Resource Center
Huawei Will Accelerate the Spread of the Video Business

2|27|17   |     |   (0) comments


What is the future of the booming video business? What changes will happen to the video industry chain in the future? Hunter Hu, VP of Huawei Video Product Line, shares his viewpoints and explains how Huawei can be an enabler and accelerate the spread of the video business.
LRTV Huawei Video Resource Center
Frost & Sullivan's Jonas Zelba on Going Beyond Connectivity

2|27|17   |     |   (0) comments


Telecom operators across the globe are trying to understand what can they offer beyond connectivity. Operators are already introducing new and innovative services but they are faced with challenges due to unclear business models. Jonas highlights that no one operator can offer all the services itself. Operators in the Middle East should look within their ecosystem ...
LRTV Huawei Video Resource Center
IDC's Paul Black on Cloudification

2|27|17   |     |   (0) comments


Paul Black from IDC shares his insights on how cloudification is expected to combile all aspects of digital transformation.
LRTV Huawei Video Resource Center
Industry Expert Michael Howard Talks About Cloud Native

2|27|17   |     |   (0) comments


Cloud Native is a really nice term and a lot of people are using it. But most of them have their own definition of what Cloud Native means. Michael Howard offers his take on the terminology.
LRTV Custom TV
4.5G Evolution: Peter Zhou on Advanced MIMO Technologies & 5G Business Prep

2|25|17   |     |   (0) comments


In the process of service transformation, operators need to catch three major opportunities and start deploying in 4.5G networks, such as video, household broadband access and digital transformation of vertical industries. 5G is coming. Operators don't need to wait for it to happen but should progressively deploy 4.5G networks by introducing 5G-oriented ...
LRTV Custom TV
What WTTX Can Deliver

2|23|17   |     |   (0) comments


Mohamed Madkour explains the benefits of WTTX while Dimitris Mavrakis discusses the challenges of delivering home broadband access.
LRTV Custom TV
Huawei on Mobile Broadband

2|23|17   |     |   (0) comments


Mohamed Madkour shares his vision on MBB for the next three years.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Uber's HR Nightmare: Company Investigates Sexual Harassment Claims
Sarah Thomas, Director, Women in Comms, 2/21/2017
Broadband Has a Problem on the Pole
Mari Silbey, Senior Editor, Cable/Video, 2/21/2017
Verizon to Start Fixed 5G Customer Trials in April
Dan Jones, Mobile Editor, 2/22/2017
Cloud Rains on HPE Earnings
Mitch Wagner, Editor, Enterprise Cloud, 2/24/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Animals with Phones
Gotta Get the Best Angle Click Here
To maximize the rolls...
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.