Amazon Says Cloud Business Still Going Strong, Plans To Continue Enterprise Push

While Amazon didn't reveal any specific information or insights into the future of its cloud business in its fiscal first quarter earnings call Thursday, partners and analysts told CRN they believe the company’s broad statements signal good news for VARs.

Amazon, battling Google and Microsoft in a no-holds-barred price war, clearly remains motivated to continue pressuring competitors with price cuts. And on the call, executives gave no indication they would slow recent efforts to target enterprise customers.

Amazon doesn't break out cloud sales figures, but revenue in its "Other" category, which is home to AWS, jumped 58 percent year-over-year to $1.26 billion.

Amazon’s Senior Vice President and CFO Thomas J. Szkutak said the company ’continued the pace of acceleration in terms of new things that we’re doing’ after being asked why Amazon isn’t hiring more, growing faster and launching more products.

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Szkutak described AWS usage as ’very, very strong,’ telling investors the market-leading cloud platform has seen tremendous growth as it has cut pricing on 42 separate occasions.

’We’re excited about the opportunity and we’re continuing to invest in that business, given the big opportunity that we have there,’ Szkutak said of AWS.

Szkutak spoke only in broad strokes about plans to lower prices, expand the product line and bulk up professional services staff. And he mostly dodged an analyst’s question as to ’nationalistic concerns’ around storing data across international borders.

Jillian Mirandi, senior analyst with Technology Business Research in Boston, told CRN that the earnings comments, while vague, were in line with Amazon’s recent moves repositioning the company from a pure public cloud provider to one that offers more of a hybrid model favored by the enterprise market.

Companies are unlikely to move their entire systems onto a public cloud, and ’most likely are never going to move everything to one cloud," Mirandi said, adding that Amazon is trying to get ahead of that problem by diversifying its cloud business.

’They don’t want people to think of them as a public cloud vendor anymore. They want to connect to all kinds of IT," she said.

Such a move would allow potential enterprise customers to leverage investments they’ve made over the last few years building on-premise environments with the new value proposition to connect to AWS, Mirandi told CRN.

Kevin RisonChu, Director of Systems and Infrastructure at Digitaria in San Diego, said he has seen a real transition from Amazon since he first started working with the company as an early cloud partner. AWS has placed a real focus of late in growing partnerships, especially with enterprises, he said.

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As a systems integrator, reseller and a customer, Digitaria has three account managers at all times working with Amazon. And the online retail giant has been a supportive cloud partner, RisonChu said, willing to fly specialists around the country when Digitaria was pitching potential customers harboring concerns about security that needed to be addressed by the vendor.

’When we first started with Amazon they didn’t have a lot of that, but now as they expand we’re able to take advantage of that and win bigger deals,’ RisonChu told CRN.

For that reason, any move toward an expansion of professional support staff is good news for his business.

’Amazon’s investing in us just as we are investing in Amazon,’ RisonChu said.

Digitaria doesn’t upsell, instead earning its revenue through the managed services it offers customers. So anytime AWS lowers prices, it makes Digitaria more competitive in its market, RisonChu said.

Mirandi told CRN these kinds of continued investments in sales and services teams, as well as hybrid cloud capabilities, will allow Amazon to maintain its leadership position in the cloud market.

The straight reseller market will most likely shrink, Mirandi told CRN, with the business evolving more into an ecosystem where partners add professional services and real value around the product.

Amazon, which historically had a self-service, online model, now has a sales team to cater to enterprise needs. It also has a professional services team which functions as ’a white-glove consulting firm to AWS’ largest enterprise customers," Mirandi said.

Amazon is also expanding its portfolio of cloud services, including analytics, security, IAM, and cloud monitoring to address a broad set of needs, and is committing itself to hybrid IT investments, enabling customers to more easily connect their data centers to the AWS cloud, according to Mirandi.

One threat to the company as it expands into enterprise is a challenge from broader infrastructure vendors like IBM and HP, which have the potential to overshadow Amazon in the eyes of customers with their more-branded IT environment.

Those companies are building up their own cloud portfolios and have the ability to impede Amazon’s market penetration, especially with customers who prefer to work with only one vendor.

’At this point, Amazon is ahead of the market. But that’s one thing for them to think about,’ Mirandi said.