Light Reading

No Crocodile Tears for AWS Just Yet

Carol Wilson

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 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
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
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
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.
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.
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
Steve Saunders provides an overview of white box networking and introduces a new "slim line" version of the OSI 7-layer model.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
Centec on Ethernet Switching

11|26|15   |   09:58   |   (0) comments

Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
LRTV Custom TV
Delivering Service Agility in the Virtualization Era

11|25|15   |   5.41   |   (0) comments

Interview with Massimo Fatato, WW OSS Business Lead, Hewlett Packard Enterprise.
Wagner’s Ring
How Might Open Source Fail?

11|24|15   |     |   (10) comments

Open source, SDN, and NFV are looking inevitable – but performance, standards proliferation and regulatory capture could derail the movement.
LRTV Custom TV
NFV Lifecycle Orchestration – a Fresh Vision for Telco

11|23|15   |   6.40   |   (0) comments

Simon Osborne, CTO Comptel, and Heavy Reading's Caroline Chappell reveal the business impacts of new SDN and NFV, and what the term service orchestration actually means. Together they define Lifecycle Service Orchestration and how the virtualized future will look for telecoms operators.
Between the CEOs
Cisco's Virtual Role in Saudi

11|20|15   |   12:15   |   (2) comments

Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
LRTV Huawei Video Resource Center
Huawei Leads With Kubernetes for Cloud PaaS

11|19|15   |   08:26   |   (0) comments

Huawei is looking to Kubernetes as a key tool for building robust open source technologies for customers and partners, said Ying Xiong, chief architect of cloud platform at Huawei, in an interview with Light Reading West Coast Bureau Chief Mitch Wagner at the recent Kubecon conference.
Women in Comms Introduction Videos
WiC in London: The Highlight Reel

11|19|15   |   5:33   |   (1) comment

NetCracker's Mervat El Dabae headlines an inspiring morning in London with help from leading women from Vodafone, TalkTalk, Hyperoptics and Ciena.
LRTV Documentaries
Why Saudi's So Hot for New Tech

11|19|15   |   05:07   |   (0) comments

Light Reading's Steve Saunders reports from Saudi Arabia, a hyper-competitive market desperate to embrace the next generation of communications technologies and services.
LRTV Custom TV
Why Data Models Deliver More Value Than Information Models

11|19|15   |   5.08   |   (0) comments

Stefan Vallin argues that more automation is needed to manage end-to-end services and the hybrid networks they run on, and that data models are key to achieving this.
Telecom Innovators Video Showcase
SDN Management & Orchestration in the WAN

11|17|15   |   7.20   |   (0) comments

Carol Wilson and Packet Design CTO Cengiz Alaettinoglu discuss CSPs' SDN service delivery and assurance requirements. Learn about a modular approach to building automated control, orchestration and management functions for the WAN that are policy- and analytics-driven.
LRTV Custom TV
Flash Networks: Optimizing for Radio Spectral Efficiency

11|17|15   |   3:34   |   (0) comments

Today most optimization vendors only focus on optimizing voice or data. Ofer Gottfried, Flash Networks' CTO, shows how improving data throughput and maximizing spectral efficiency reduces capital and operating expenses while also providing a platform for user engagement.
LRTV Custom TV
Making Pay-TV User Experiences Millennial-Friendly

11|16|15   |   6:42   |   (0) comments

The unique challenge of reaching and engaging Millennials is driving pay-TV video experience transformation that can include higher quality UIs, viewing of multiple content streams at once and seamless transitions between handheld devices and the television.
Allot MobileTrends Report H2/2015 reveals how daily online behavior can be used to discover smarter ways to profile customers and propose valuable, real-time offers to them.
Hot Topics
Samsung to Sell Wireless Networking Unit?
Dan Jones, Mobile Editor, 11/23/2015
Samsung: No Sale of Wireless Unit
Dan Jones, Mobile Editor, 11/25/2015
How Might Open Source Fail?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/24/2015
Sprint to Get $1.2B From New Leasing Venture
Dan Jones, Mobile Editor, 11/23/2015
Networking Shines in HP's Gloomy Final Earnings
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/25/2015
Like Us on Facebook
Twitter Feed
December 15, 2015
Virtualizing Cable Services
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Centec CEO James Sun talks to Steve Saunders about Ethernet switching and the white box revolution.
Light Reading founder and CEO Steve Saunders talks with Zayan Sadek, Regional Manager at Cisco Systems, about the competitive communications services market and advance of virtualization in Saudi Arabia.
Cats with Phones
Can't Find the Phone on Thanksgiving? Click Here
Check under the cat! (hint: bottom right)
Live Digital Audio

Broadband speeds are ramping up across Europe as the continent, at its own pace, follows North America towards a gigabit society. But there are many steps to take on the road to gigabit broadband availability and a number of technology options that can meet the various requirements of Europe’s high-speed fixed broadband network operators. During this radio show we will look at some of the catalysts for broadband network investments and examine the menu of technology options on offer, including vectoring and for copper plant evolution and the various deployment possibilities for FTTH/B.