AWS Enjoys Shift from On-Premises Datacenter Spending to Cloud

Amazon Web Services Inc. (AWS) is the main benefactor from the growing expenditure on cloud infrastructure services, which research firm Canalys estimates reached $8.2 billion in the first quarter of this year, en route to $190 billion by 2020.

"The dramatic shift of datacenter expenditure from on-premises to service provider deployments is continuing in 2016, as use of cloud infrastructure services accelerates," the company said in a statement last week.

Even in light of more enterprise adoption of cloud services, the company pointed to consumer-centric services as the main growth driver as more people use the cloud for video streaming, content storage, gaming and social network services.

"Use will continue to grow as smart phone penetration increases, high-speed connectivity becomes pervasive, bandwidth restrictions ease and new content-driven apps emerge," analyst Daniel Liu said. "The combination of cloud and mobile has enabled new business models and tech start-ups to emerge, giving instant access to billions of customers via online marketplaces."

Colleague Matthew Ball picked up on that idea.

"The push by Amazon, Microsoft, Google and IBM SoftLayer to offer datacenter capacity to businesses is also having a major impact on the IT industry," Ball said.

Canalys said more than half of servers shipped this year will go to datacenters providing cloud infrastructure services, though primarily in low-margin and increasingly white box deals, which it said affects vendors and channel partners selling compute and storage.

"These datacenters are scaling rapidly and operated by an increasingly consolidated number of providers," Ball added. "The top four providers accounted for nearly 60 percent of the total market in Q1, up from just over 45 percent two years ago, with Amazon leading the way with 30 percent. This move is supported by virtually every software company prioritizing the development of their offerings for the cloud."

Another analyst, UBS, identified IBM as the new addition to that group of "top four" providers in an article by Investors Business Daily, with each vendor showimg strength in different areas.

"While AWS ... and Google are strongest in infrastructure-as-a-service (IaaS), Microsoft’s Azure service and IBM are formidable in platform-as-a-service (PaaS), according to the UBS survey of corporate information technology executives," the article stated. "In the IaaS market, customers rent computers and data storage via the Internet. In PaaS, companies sell applications and software, including business management and database services, that run on cloud infrastructure."

"Cloud is not a winner-take-all market," Investors Business Daily quoted UBS as saying. "We believe the 'big will get bigger,' -- AWS, Microsoft, and Google are going to be winners, with IBM holding its own.

"The likely losers, based on UBS estimates of revenue exposure, include Rackspace (RAX), Nimble (NMBL), Pure Storage (PSTG), Brocade (BRCD), Hewlett Packard Enterprise (HPE), and NetApp (NTAP)."

Apparently a $190 billion pie can only be sliced up so many ways.

About the Author

David Ramel is an editor and writer for Converge360.


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