AWS held its third annual re:Invent user conference with 13,500 attendees in Las Vegas last week. While the event had similarities to other IT conferences that included an expo floor, keynotes, and sessions that fascinated me, AWS has the potential to disrupt the way businesses consume IT, IT organizational structure, high-margin IT infrastructure business models, and product marketing.
There were a pile of announcements at the event, but the following disruptors are the ones that will account for the AWS blast radius:
IT Consumption: My conversations with customers and the event content validated that the first wave of movers are absolutely net new applications driven by developers. This is followed by website hosting and digital transformation, where businesses are collecting, storing, and running analytics, resulting in actionable results and visibility. The next wave can be super hard and involves the migration of traditional business-critical applications. I spoke with one customer who is on the fast track of AWS adoption, but re-platformed SAP on-premise for a simpler inline migration as opposed to a risky export and import of critical business data. With this said, AWS has the crosshairs on major IT vendors such as Oracle and is setting itself up to challenge commercial databases with Amazon DynamoDB, RDS, and Red shift.
IT Organization Structure: I spoke with a seasoned CIO who saw the advantages of AWS services, but was struggling to capture the same enthusiasm from his existing infrastructure teams. As a result, the CIO decided to place a relatively new IT professional out of college in his early twenties as the lead for AWS. The result…adoption of AWS services across the board has soared. The existing infrastructure team remains in place and the CIO has not had to make any new hires, but new projects and even desktops with Amazon WorkSpaces are landing on AWS. This is a key dynamic to hone in on for existing IT vendors and IT professionals who are working through their 2015 cloud strategies.
IT Vendor Business Models: Andy Jassy lit a fire for traditional IT vendors with statements in his keynote that reminded the attendees that “this is not a sales and marketing conference” and “we will not come knocking on your door at the end of the month or end of the quarter offering deep product discounts.” Granted, we are really just at the beginning of this game and the economic modeling of cloud can be complex, but the AWS utility model and simply how AWS is making IT easier should not go unnoticed by the IT vendor community. IT vendor executives no longer get a pass for casually monitoring and tracking AWS. The current activity, growth, and potential risk to flatten existing businesses is very real.
Marketing: Amazon is focused on cultivating customers as opposed to marketing products. They are finding out what the customer wants and fulfill the need as opposed to focusing on transactions. The company is approaching the customer as behavioral scientists and not marketing specialists with the goal of maximizing the customer lifetime value. Traditionally IT vendors push a product to many customers and Amazon is taking the inverse approach centered on customers and promoting the most relative products at the appropriate time. This has profound impact for traditional marketing, messaging, and campaigns as well as how AWS engages and interacts with its go-to-market partners. Cultivating customers through building relationships and evolving to customers’ needs is a strength of Amazon that other IT vendors will need to be acutely aware of and prepare to counteract.
The lights aren’t about to go off in data centers across the globe, but the process of including cloud consumption as a strategic part of IT architecture and business consumption is here to stay.