Sure, Amazon should be worried about private clouds, but it can't continue to ignore IaaS competitors

During the opening keynote for Amazon Web Services inaugural developer conference, Andy Jassy, senior vice president for AWS, spent a surprising amount of time addressing the enterprise market.

That's not a bad idea. While plenty of enterprises do run apps on AWS – Jassy had many, many examples to offer – there is a ton of opportunity left for businesses that haven't yet made the leap or have only dipped their toes in.

andy jassy.jpgSource: Amazon
Andy Jassy, AWS senior vice president, spoke during the opening keynote at AWS re:invent.

But his attempts at taking shots at competitors was misguided and some of the solutions he offered to appease enterprise concerns also missed the mark. That leaves opportunity for some AWS competitors.

Jassy set private clouds in his sights. The "old-guard tech companies" have been trying to sell enterprises on private clouds, which they say offer all the benefits of AWS but in a private data center, he said.

He's definitely right when he said that's not true. Private clouds serve a purpose (mainly for security and compliance reasons) but they don't let businesses pay only for what they use, scale up quickly in a pinch, go global easily, or save on management costs.

"So you may ask why are these old-guard tech companies so desperately trying to get you to buy the private cloud? The answer is the economics of what we're doing are extremely disruptive for the old-guard tech companies," he said. Amazon is a pro at the high-volume, low-margin business, which is how it runs AWS. But the traditional tech companies are used to much higher margin businesses. "High-margin businesses have been around forever. But it's radically different to run than a high-volume, low-margin business," he said.

Maybe. But that's not really the point. Private clouds will serve a purpose. AWS will surely be able to convince some businesses to go its way instead of the private way, but not all.

The bigger potential issue for AWS, which Jassy didn't mention once, are the forthcoming competitive IaaS offerings from the old-guard tech companies. AWS has a massive lead. But when companies like Oracle, Dell, HP, Microsoft and others hit their stride with their IaaS offerings, enterprises that have had long relationships with those vendors will at least consider them.

Some of those old-guard tech companies that have many years of experience working with enterprises may come up with better ideas for meeting their needs. For instance, Jassy mentioned that companies can integrate with Active Directory so that employees can sign in to AWS with their Active Directory sign on. That allows managers to see who has signed up for which AWS services.

That's a step in the right direction but clearly it doesn't work. A recent Forrester survey found that 90 percent of cloud developers it queried maintain personal accounts on clouds separate from their corporate account. That could be for personal use. But in many cases it's surely because it's just easier to sign up to use the service with a personal account and bill their employer later.

Real user control and management is something that traditional enterprise vendors might be able to do better.

AWS has other features aimed squarely at enterprises. Its Virtual Private Cloud and Direct Connect are two. The simple fact that AWS runs data centers in nine locations around the globe is appealing to many big businesses.

Amazon has done an amazing job at iterating its service – Jassy said that it rolled out 158 significant new services and features this year – so expect it to come out with additional features aimed squarely at enterprises. Its head start will serve it well. But if I were at AWS, I wouldn't let the up-and-coming IaaS services coming from the old-guard tech companies out of my sights.

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