In the IaaS market, Caveat Emptor Applies

Ed. note: This is the third in a three-part series drawn from a major report on Amazon AWS by Wikibon Co-Founder and Chief Analyst David Vellante. The first examined Amazon’s formidable AWS strategy. The second looked at how other IaaS service providers can compete successfully with AWS.

Amazon AWS is impressive and has changed the way the industry thinks about enterprise infrastructure, writes Wikibon Chief Analyst David Vellante in his comprehensive new report, “Cloud Computing 2013: The Amazon Gorilla Invades the Enterprise”.

. It’s catalyzed an entire trend around private cloud and forced organizations to improve agility and become more efficient. Moreover, it’s created a new class of cloud service providers that are geared to better serve the enterprise.

As a result, IT organizations (ITOs) will see continued pressure from CEOs and “Shadow IT” to improve agility, simplify IT operations, and cut costs. While prudent CIOs will focus on data governance, privacy, security, and other organizational risks associated with moving to the Public Cloud, the reality is that intensified partnerships with cloud service providers are probably in their future.

  1. The complex nature of enterprise IT infrastructure is a reality that Amazon will try to minimize by picking off the “low hanging fruit.” This will naturally mean a good fit for developers, startups, and smaller businesses, but core enterprise IT apps are best not placed on AWS for the foreseeable future.
  2. Amazon marketing, however, will attack enterprise IT suppliers as “gross margin pigs.” This could have a negative ripple effect on IT organizations much in the same way as Nicholas Carr’s incendiary article and subsequent book “Does IT Matter?” did.
  3. The reality is that typically enterprise IT supports hundreds or even thousands of apps and tens-of-thousands of users, whereas Amazon success stories (e.g. Netflix) typically are with a small number of apps supporting large numbers of users. CIOs must exercise caution and find ways to communicate this dissonance to executive management.
  4. In the next five years, CIOs and their ITOs will spend more time architecting and brokering cloud services and less time setting up and managing infrastructure plumbing. Understanding the right strategic fit and the best “horses for cloud courses” will become more important.

The customers Wikibon spoke with were generally mid-to-large-sized shops. These customers cited several considerations in choosing a cloud service provider:
Data placement is really important.

  • Latency Rules! If you’re going to run a database application, you need low latency.
  • Leading-edge SPs are appealing to customers and differentiating with backhaul (i.e. connecting resources) to provide access to data and minimize the cost of data movement.
  • Customers are migrating to SPs that can find opportunities in data analytics within specific industries and domains.
  • Security remains the #1 concern.
  • Hybrid cloud adoption is rising, but hybrid cloud via federated applications is limited.
  • Tier 1 Apps are moving to the cloud.
  • SLAs remain a sticking point.

The decision to outsource infrastructure to the Public Cloud, while perhaps trivial for a smaller business or a funded startup, is not simple for many mid-sized and large organizations. Wikibon recommends that CIOs investigate several areas of caution and consideration prior to making any moves to the cloud generally but Amazon specifically, including:

  • Amazon is a horizontal player competing on the basis of scale. It’s not about high touch. How much support does your application require from your service provider?
  • Think of an SLA as a proxy for shared risk and degree of SP flexibility. Will the SP change terms and condition language in an SLA? If not, it’s a red flag.
  • Amazon’s premium SLA pricing is a complex matrix of options that underscores its aversion to high-touch business models.
  • An SP statement that it can support applications beyond test and dev is not an guarantee. Dig deeper and study use cases carefully.
  • Amazon’s security/auditing practices are a caution. Is the SP willing to share threat matrixes, establish shared goals, define incidence, customize reporting, and generally comply with organizational edicts?
  • What is the SP’s track record with outages, and how has it responded?
  • What kind of access does the SP provide to its professionals? Can the SP be a consultant and trusted advisor?
  • What other business processes need to be in place to move to a cloud SP? For example, when you write an app on Amazon you have to consider latency management, location management, SLA management; all through Amazon’s API. Are you ready for this complexity?

Amazon AWS is moving more aggressively into the enterprise, stepping up marketing of its impressive suite of services. Its message to the corner office is “why waste time doing plumbing when we can simplify IT.” This will resonate with CEOs, CIOs, and CTOs at mid-to-large-sized organizations. However, they must understand the right strategic fit for Amazon, which today is essentially test and dev apps and corporate skunkworks programs. At the same time, IT executives should forge relationships with service providers that can mimic many AWS benefits within specific verticals or domains while providing vastly improved partnership models around security, governance, risk management and strategy.

As with all Wikibon research, this report is available in its entirety on the public Wikibon Web site. IT professionals are invited to register for membership in the Wikibon community. This allows them to comment on research and publish their own Professional Alerts, tips, questions, and relevant white papers. It also subscribes them to invitations to the periodic Peer Incite meetings, at which their peers discuss the solutions they have found to real-world problems, and to the Peer Incite Newsletter, in which Wikibon and outside experts analyze aspects of the subjects discussed in these meetings.