Amazon’s Aggressive Entrance to the Enterprise – Breaking Analysis

Last weekend the Wall Street Journal reported that Amazon’s cloud business topped $2 billion in revenue in 2012 and will do nearly $4 billion in 2013, with some analysts forecasting as high as $20 billion by the year 2020. Cloud computing analysts believe that the move toward selling infrastructure as a service could boost Amazon’s long term margin prospects. Wikibon Chief Analyst Dave Vellante joined Kristin Feledy on the Morning NewsDesk Show to discuss Amazon’s history to date and their outlook for the future.

Vellante gave some background on Amazon’s rise in the infrastructure as a service market. Seven years ago, Amazon started renting out infrastructure from its retail operations to customers. He said Amazon claims the amount of infrastructure it adds on a daily basis to support new AWS (Amazon Web Services) clients is comparable to what it took to run the whole Amazon company back in the mid-2000’s. Vellante noted, “What that’s done has actually created the entire cloud revolution and catalyzed an entire industry.”

Vellante shared Amazon’s long term outlook, in terms of the AWS side of the business. Vellante said that Amazon is looking to compete in the enterprise. He declared, “Amazon is aggressively entering the enterprise. It wants to gain share, and it wants to do so by taking its retail mentality and driving it into the higher margin enterprise business.” Vellante believes it will be a big leap for Amazon to go from where it is today, in servicing the small businesses, to servicing the mainstream enterprise and really appealing to the CIOs of those businesses.

Vellante discussed some of Amazon’s customers who are outsourcing their IT to Amazon, such as Netflix and Nasdaq. He also mentioned who some of Amazon’s new enterprise competitors will be, listing companies such as IBM, HP, VMware, and EMC.

Feledy asked Vellante how he is advising his CIO clients, with respect to AWS. Vellante responded that CIOs should be open to AWS and embrace the notion that it’s not unreasonable to outsource certain applications to the cloud. At the same time, he said that CIOs can be advisors to their companies and help them understand where the right strategic fit is for AWS in their environments.  See the entire segment with Kristin Feledy and Dave Vellante on the Morning NewsDesk Show.