Monday, June 30, 2014

Should AWS build a Consulting Practice?



There was an interesting article today on Tech Target (SearchAWS) where Katherine Wiley interviews Nick Piagentini, who is a senior solutions architect at CloudPassage.

Nick’s argues that AWS is not really ready for enterprise customers. He also states that Amazon would be smart to invest in building an enterprise focused professional services organization or else they will lose out to more enterprise savvy competitors such as Microsoft and IBM. 

This is an argument that I strongly subscribe to. Amazon has certainly defined the commodity cloud space, and are pretty much unassailable in the small to medium segment. However the problem with any commodity service is that it is easily replicated and profits are always under margin pressure.  

Amazon may be winning market share but that is a double edged sword if your costs start to rise as they inevitably do when companies get larger. And it’s not as if Amazon’s profits are particularly healthy lately anyway, they run pretty close to the edge. Both Microsoft and Google have much larger war chests and much bigger cash cow revenues to invest in infrastructure and even to undercut AWS if they chose to do so.

But why would Microsoft and IBM follow Amazon in a race to the bottom if they can extract better returns from targeting enterprise customers? What if they let AWS win the commodity cloud battle? If AWS get “stuck” in commodity then they will have great difficulty in trying to differentiate their products from a commodity base, unless they start to develop entirely new products and services, which will in turn impact profitability. Possible when the market is expanding quickly, but very challenging as the market matures.  

Of course this is all in the future, as of today AWS can still capture the enterprise market if they choose to do so. The easiest and quickest way to win the enterprise is to offer professional enterprise services. They don’t even need to change the product portfolio significantly at this stage.

AWS must avoid the mistake relying on partners to address enterprise engagement. Partners have their place, but enterprise customers will not bet their businesses on small system integrators, and most of the large services organisations in the world are pushing alternate vendor cloud visions. This is the mistake that VMware made with their foray into cloud and still struggle with to this day. It is critical for vendors to have direct interaction with enterprise customers. 

You don’t have to drive huge revenues out of professional services, but you do need an option for enterprise customers to rely on a vendor for end to end delivery.