There is absolutely no question that Amazon Web Services remains the world’s leading supplier of cloud computing infrastructure. That shouldn’t be a problem, when you’re the leader in a global market.
But that infrastructure has become a commodity, with its value determined largely by the market at large. Consequently, Amazon finds itself in the curious position of marketing itself the same way power companies do — power companies that struggle every day to differentiate themselves.
Except that power companies, in much of America, are protected by limited monopolies.
The “U” Word
“So why are companies flocking so quickly to the cloud?” asked Amazon AWS Senior Vice President Andy Jassy, during his keynote yesterday at Amazon’s re:Invent 2015 conference in Las Vegas.
“You don’t have to guess how much capacity you’re going to need,” he answered himself. “When your demand dictates, you scale up seamlessly; and when you’re no longer at your peak, you give that capacity back to us and stop paying for it, so you get real elasticity.”
This explanation came just minutes after Jassy completed relating the continued growth patterns for AWS, compared against rising competitors such as Microsoft Azure, in terms of capacity delivered. Amazon’s EC2 compute service, he showed, delivers 95 percent greater instance hours on a year-over-year basis.
When your key growth metric is measured in service hours, generally you’re a utility company.
The general theme continued throughout the conference yesterday, as AWS Vice President for infrastructure Jerry Hunter promised to take attendees behind the scenes of Amazon’s ongoing success with scalability.
Reliability, continuity, ingenuity, all these were among Hunter’s themes — the same ones used to decorate speeches on things like waste water treatment systems.
“Imagine what it would be like if, when you went to get power from an outlet, you plugged something in, and it wasn’t there,” Hunter said at one point.
“You expect power to be there. Our customers expect the capacity to be there every time, even when they need more than they thought they’d need.”
Hunter even began his session by uttering the dreaded “U” word itself. “So long as they [customers] don’t have to think about this, they can focus on the services and applications that differentiate their business, and not the undifferentiated heavy lifting that my team does for them.”
You might think, perhaps this distinction shouldn’t really make much difference if Amazon is good at what it does — and there are a great many customers who argue, it is.
But the provider of any commodity service, whether or not it enjoys a limited monopoly (Amazon, of course, has strong competition), faces the long-term problem of value differentiation.
If elastic compute services all looked and worked alike, instead of respect today, Amazon might have the reputation of a certain cable television provider.
In a 2012 book entitled Infrastructures of Consumption, focusing on European power and commodity service providers with emphasis on the Netherlands, a trio of researchers note that both Dutch and British electricity services have been largely privatized, resulting in competitive markets.
Within those markets, competitors are forced to find ways to differentiate their services.
“As the basic product (electricity) is the same,” the researchers wrote, “competition is promoted through the differentiation of multiple services associated with electricity supply... Although electrons are always the same, energy companies have succeeded in selling different kinds of electricity to different clients.”
They go on to tell the story of how “green” electricity sells at a premium, being marketed as having been generated by specialized sources that take extra care to be kinder to the environment — for instance, wind farms.
Red Shift Indeed
It’s on that note that I bring up the fact that yesterday Amazon introduced a service called Firehose, as a kind of premium integration connection for its Kinesis analytics service introduced in 2013.
Amazon’s strategy has always been to differentiate itself with services over and above its infrastructure. But its competitors are very well-known for, and have long histories of, providing many of these same services to long-standing customers.
For example, Microsoft’s Power BI has reportedly made tremendous strides at introducing new customers to Azure. Amazon’s announcement today of its QuickSight business intelligence tool is clearly an overdue, but necessary, effort to stem a small tide of swayed customers.
There are small tides like this one popping up all over the cloud landscape. Now, it would appear, Amazon is combatting these sways with Firehose.
“What it allows you to do is,” Jassy said, “take any streaming application — a mobile application, a web application, telemetry that’s connected to a device —and with a single put API call to Firehose, load all of your data into AWS.”
At first, customers will get the option of loading directly into S3 storage or into a Redshift cloud-based data warehouse, he said. As the service expands, there will be further data store options.
“It means that you can start immediately querying the data, loading it into your Hadoop clusters, and starting to get that feel for what’s happening end-to-end, in your application,” he continued.
Does this sound like a premium for the sake of a premium? IDC Program Director for Software Development Research Al Hilwa, talking with CMSWire yesterday, said no.
“These AWS services are typically priced on a pay-as-you-go basis which is typically cheaper than traditional software, though the bill does add up if you are a heavy user,” Hilwa concluded.
“I think Amazon’s approach to product development is always to iterate and improve. Kinesis has gotten better, but this space is competitive and other players in the data and analytics space are not standing still.”
Jassy certainly was not standing still when he cited Gartner analyst Lydia Leong as having said, “IT organizations cannot treat cloud (Infrastructure-as-a-Service) IaaS providers like commodities. And that’s because they’re not! They are really different platforms and capabilities at this point.
“And when you talk to customers, this really matters, because [with] any company that has a large number of workloads, there’s going to be reasonable diversity. They’re not all cookie-cutter.”
Jassy may certainly be accurate here. But when Amazon wins over those non-cookie-cutter customers, expect those gains to appear on a chart showing the ever-increasing number of instance-hours supplied.
All that would be missing is Reddy Kilowatt’s smiling face.
Title image by ColumbusCameraOp.