Light Reading

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 , Orange 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
Flash Poll
From The Founder
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
LRTV Huawei Video Resource Center
Predicting Traffic Patterns for Quality Mobile Broadband

4|29|15   |   6:45   |   (0) comments


Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network functions virtualization (NFV) is not the easiest of topics to take on board, so here's a Light Reading infographic, developed following conversations with the folks at HP, that helps make sense of where NFV is taking the industry.
Hot Topics
AT&T Testing Virtualized GPON
Carol Wilson, Editor-at-large, 5/15/2015
Choosing a Technology Supplier? Consider Changing Your Selection Criteria
Steve Saunders, CEO and founder, Light Reading, 5/18/2015
Verizon Saves 60% Swapping Copper for Fiber
Sarah Thomas, Editorial Operations Director, 5/19/2015
Chattanooga Charts Killer Gigabit Apps
Mari Silbey, Senior Editor, Cable/Video, 5/20/2015
Smarter 'Dumb' TVs Will Drive OTT Adoption
Mari Silbey, Senior Editor, Cable/Video, 5/18/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
With 200 customers in 60 countries, Stockholm-based Net Insight has carved out a solid leadership position in one of the hottest vertical markets going in comms right now: helping service providers and broadcasters deliver video and other multimedia traffic over IP networks. How has Net Insight managed to achieve this success in the face of immense competition from the industry giants?
My ongoing interview tour of the leading minds of the telecom industry recently took me to Richardson, Texas, where I met with Rod Naphan, CTO and SVP, Solutions, ...
I recently popped down to Texas to chat with CEO Eric L. Pratt about his company, Taqua.
Cats with Phones