& 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 LLC 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
The independent evaluation of Nokia's key virtual network functions (VNFs) was a defining moment for the Finnish giant.
Flash Poll
Live Streaming Video
The Real-World View of Service Provider Innovation
Executives from Deutsch Telekom, Facebook, AT&T, Vodafone, and Masergy share insights from their company’s major transformation efforts and updates on key issues including open source, managed cloud connections and 5G.
LRTV Documentaries
Light Reading Hall of Fame 2016

5|23|16   |   05:43   |   (0) comments


Find out who has been welcomed into Light Reading's Hall of Fame this year.
LRTV Custom TV
ZTE TM Forum Highlights

5|23|16   |     |   (0) comments


ZTE showcased its new ICT solutions at TM Forum in Nice.
LRTV Interviews
Gamma's MD on the Emergence of UC2

5|20|16   |     |   (0) comments


Gamma Communications Managing Director David Macfarlane believes the unified communications (UC) market has reached a tipping point.
LRTV Custom TV
The Ultimate 5-Minute Guide to Digital Customer Engagement

5|20|16   |     |   (0) comments


In this short video, you will hear all about how Digital Customer Engagement is the key to meeting customer expectations, keeping them happy, and maximizing revenue. VP Product & Marketing at Pontis, Ofer Razon, breaks down for us the five essential capabilities for successful Digital Customer Engagement. Don’t miss!
LRTV Custom TV
NFV in 2016: Part 1 – NFV Use Cases Get Real

5|19|16   |   05:57   |   (0) comments


Consensus is building around the key use cases for NFV, including managed IP services at the network edge and on customer premises, which can generate new revenues from enterprises/SMBs and consumers; Evolved Packet Core to support LTE migration; and adjacent technologies, such as TAS and IMS, to support VoLTE and next-generation charging and policy control ...
LRTV Custom TV
Nokia's Steve Vogelsang on NFV – Part 3

5|19|16   |     |   (0) comments


Steve Vogelsang discusses the challenges of operational transformation and how Nokia helps its customers. Join Steve at the Big Communications Event in Austin the morning of May 24, on his keynote and optical networking panel.
LRTV Interviews
Level 3: Why UC Is In Demand

5|17|16   |   04:12   |   (1) comment


Andrew Edison, Level 3's senior VP of sales, EMEA region, talks about the drivers of growth in the unified communications services market.
LRTV Custom TV
ARM's OPNFV Action

5|17|16   |     |   (0) comments


At the ARM booth at MWC 2016, Joe Kidder and Bob Monkman speak to Light Reading about OPNFV and their upcoming action.
LRTV Custom TV
Nokia's Steve Vogelsang on NFV – Part 2

5|16|16   |     |   (0) comments


Steve Vogelsang gives advice to service providers on how to move to NFV. Join Steve at the Big Communications Event in Austin the morning of May 24, on his keynote and optical networking panel.
LRTV Interviews
Interoute CTO on NFV's Maturity

5|13|16   |   06:46   |   (1) comment


Matt Finnie, CTO at international operator Interoute, explains how NFV has made life easier in terms of logistics and how Interoute can now enable a 'software-defined moment' for its customers.
LRTV Huawei Video Resource Center
UBBS 2016 Highlights

5|12|16   |     |   (0) comments


Highlights of Huawei's UBBS event in Hong Kong.
LRTV Huawei Video Resource Center
European 2020 Digital Agenda

5|12|16   |     |   (0) comments


Anacom's Fatima Barros discusses the plan to bring ultrafast broadband to Portugal by 2020.
Upcoming Live Events
May 24-25, 2016, Austin Convention Center, Austin, TX
September 13-14, 2016, The Curtis Hotel, Denver, CO
December 6-8, 2016,
June 16-18, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
Hot Topics
WiCipedia: Short Skirts & Back-Up Plans
Eryn Leavens, Special Features & Copy Editor, 5/20/2016
Nokia Plays It Smart With Major Mobile Devices Brand Deal
Iain Morris, News Editor, 5/18/2016
Ingenu Revs Up IoT Rhetoric
Iain Morris, News Editor, 5/18/2016
Google Doubles Down on Machine Learning, AI
Mitch Wagner, West Coast Bureau Chief, Light Reading, 5/19/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.