What's Amazon's enterprise strategy for the cloud?

Amazon is making a push to gain traction in the enterprise market

Roaming the floor of Amazon Web Services' first user conference last week, it didn't look like a traditional tech show. Many of the 6,000 attendees were with startups or midsize businesses looking to learn more about AWS services or the public cloud.

AWS has been making moves in recent months targeting the enterprise market, with the release of services such its Glacier storage service, its Redshift data warehousing product and others. But it begs the question: What is Amazon's enterprise play right now?

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Amazon wants you to leave this conference thinking that anything can be done on its cloud, says Gordon Haff, a cloud evangelist for Red Hat who attended the show. "Public cloud will be a part of enterprise IT, it will not be all of enterprise IT," he says. CIOs are still trying to figure out what workloads make sense for running in the cloud and which still are best for on-premise applications. Many specialized applications, he says, are still best to run yourself in your own data center.

James Staten, a Forrester analyst, predicts that 30% to 50% of enterprise workloads and applications could one day run in the public cloud. "It's rare I talk to an enterprise today that isn't doing something in AWS's cloud," he says. The biggest factor holding the industry back, Staten says, is culture.

Customers are used to running their systems on-premise. The cloud is a completely new model with a new pricing structure of pay as you go (PAYG), new operations management and new use cases. "Enterprises aren't used to the PAYG model," says Michael Wasser, of cloud cost management startup Apptio. "They want to know how much they'll pay and they want the bulk discounts. That hasn't seemed to be AWS's sales model so far."

In fact, at the conference, AWS Senior Vice President Andy Jassy highlighted the opposite point: The public cloud, he says, is ideal for businesses because there are no upfront costs and businesses only pay for what they use.

Pricing structure isn't the only concern, though. There are perceived risks around security, certifications and privacy, which is why so many of the AWS use cases start as small test and development projects with non-sensitive data. "Shadow IT," when employees or business units within an organization use IT resources such as AWS cloud services without informing their IT department, is an entry point for many organizations that lead to more formalized uses of AWS resources. "As soon as those cloud projects start producing revenue, or start impacting the bottom line, that's when IT gets involved," says Peder Ulander of Citrix, whose cloud management platform integrates with AWS services.

AWS says despite many enterprises not being willing to jump fully into the public cloud, adoption has "accelerated rapidly" in the enterprise market, says Adam Selipsky, VP of marketing, sales and support for AWS.

Jeff Bezos, the founder of AWS's partner company Amazon.com, said when asked that what surprised him most about AWS has been the adoption by enterprises, government and education institutions despite the service being only six and a half years old.

"For enterprises it's a process," to move to the cloud, Selipsky says, adding that even Amazon.com, one of AWS's biggest users, has taken a multi-year migrations strategy to using cloud resources. "We think a significant majority of workloads will move to the cloud," he says.

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Gartner analyst Lydia Leong says many enterprise deployments of AWS services are still driven by specific use cases. There are notable exceptions, such as Netflix, one of AWS's poster customers, which runs almost its entire business on Amazon's cloud. But a more common enterprise use case is for public cloud to run IT workloads beyond the scope of their internal resources. Perhaps no company better exemplifies that than Cycle Computing.

CEO Jason Stowe helps companies use AWS resources for high-performance computing needs. Cycle works with a majority of the top 20 pharmaceutical companies, he says, including Novartis, which ran a 30,000-core workload over 95,000 compute hours in AWS's cloud to run analysis of drug tests. It's a game-changer for the enterprise, he contends.

"This is like moving from the horse and buggy to the automobile," he says. As Cycle Computing ramps up, he says large-scale workloads of 10,000 to 20,000 cores have becoming "pedestrian" for Cycle to manage and AWS to handle. Robert Half International, The Hartford and Pacific Life all discussed at Amazon's conference ways in which they're doing HPC in AWS's cloud.

Still, when Novartis, Pacific Life and other major enterprises are doing these massive workloads on AWS's cloud, it's not the company's entire IT operations running the cloud; it's a couple of really big workloads.

"The public cloud is great for that spike of usage and resources that are needed," says Zev Lederman, of Newvem, which helps companies track and optimize their AWS usage. For AWS, and the public cloud in general, to move from intermittent use to consistent, all-the-time usage, customers, he says, need to have better tools to manage their cloud workloads, which is what Newvem helps companies do.

Enterprises at re: Invent seem to echo that sentiment. Eliza Corp. is a healthcare engagement service outside of Boston that has built a version of its proprietary tool that informs customers about healthcare information that will run in AWS's cloud. Technical Director Josh Siegel is optimistic about the scale that AWS will provide the company, but he's unsure about if customers will be comfortable with their data being stored in a public cloud. "If you're a startup, it's a no-brainer," to use AWS services, he says, but enterprise use cases are a little trickier, he says. Along with another developer at the firm, Siegel has been architecting the cloud-based version of the company's product, which he hopes to launch this month for a trial version. Depending on how that goes, additional workloads could be moved to the cloud.

Bharat Shyam, CIO for the state of Washington -- a state with 64,000 employees that serve 6 million residents -- says "governments tend to be very risk averse," which is why no personally identifiable information (PII) of Washington state residents have been placed in AWS's cloud by his staff. He does use AWS services for disaster recovery, backup and some applications, though. For example, the state's traffic advisory system can experience a tenfold increase in usage during heavy storms. Using AWS's services allows the application to scale up virtual machine instances as needed, which means users get the most current information possible.

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Intuit, a $4 billion publicly traded company that makes TurboTax and other small-business accounting products, is in a similar situation. Troy Otillio, the company's cloud strategist, first suggested using AWS cloud resources directly after the company had just set up a new data center but the company quickly outgrew the capacity. Migrating workloads to the cloud after just making a large investment in dedicated infrastructure was not warmly received at the company, he says, but it seemed like an even better idea after the data center experienced two outages. Soon thereafter, Otillio migrated about a dozen applications into AWS's cloud, but none that had PII data of customers in them.

One of the biggest advantages of using the cloud, he says, is the speed and agility the company has in being able to try new products and applications, host them in AWS's cloud, spin them up when they launch, scale them as they grow, or terminate the resources if it is not well received in the market. Startup competitors use AWS and have been doing that. Now that Intuit has the same access to dynamic resources, he feels the playing field is leveled. "They move fast, now we can too," he says.

Despite stories like these, some believe that AWS still has a long way to go before it's truly considered an enterprise company. David Linthicum, a SOA and cloud computing consultant at Blue Mountain Labs, says working in the enterprise market takes special attention from vendors. Enterprise IT decision makers want to feel comfortable with their vendors; they want open lines of communication and sometimes special attention. Amazon.com and AWS, Bezos says, are "dwarfed" by the salesforces of competitors, though, which is why the company's chief says Amazon has to compete on products and services. Linthicum questions if that will be enough.

"Enterprises are used to relationship selling, and special treatment," Linthicum says. "They will sign multimillion-dollar deals with cloud providers, but enterprises will need a traditional sales process to drive the larger strategic deals. This is not to say that AWS, and others, won't get a good bit of business from the bottom up, but most of the larger, more strategic deals will come from relationships with IT leaders, not developers and engineers. Good technology will only take you so far."

Selipsky, the AWS marketing chief, says the company has made a concerted effort to focus on the enterprise in recent months. Whether that's enough will certainly be a big question to watch in 2013.

Network World staff writer Brandon Butler covers cloud computing and social collaboration. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW.

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Copyright © 2012 IDG Communications, Inc.