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Published on Jul 15, 2011

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Today’s one-day AWS Summit in San Francisco, which will be covered by theCUBE with a day of interviews of key players, comes at a particularly interesting moment in the development of the high-growth business-to-business cloud services market. For the last two years AWS has been growing at a phenomenal rate, with no sign that that growth is going to slow anytime soon. Yet despite that incredible growth and its dominant position in the market, AWS has just cracked the surface of the potential market, and despite its success its service is far from fully formed and is in some ways immature.

This year for the first time it is facing real competition from providers with the resources to match its own, in the form of IBM and potentially HP and the Google Compute Engine. At this one-day summit and at the East Coast summit later this spring in Boston, AWS should map out its direction forward, what it is doing to strengthen is service portfolio, and how it will react to this competition to maintain its dominant position. Overall, given the very high growth of this market, the issue will not be so much competing directly against these new entrants — the market is growing at a rate that should provide as much business as all the competitors can support — as it is growing faster than the competition and managing its growth to maintain its overall financial solidity.

So far Amazon’s main client base has been other tech industry companies much like itself, cloud startups founded and in most cases still run by young computer geeks, some of them very high growth companies. They naturally look to the cloud for IT support while simultaneously wanting to maintain control over their IT destinies. Technology is at the heart of these businesses, as opposed to the vast majority of traditional companies where IT is necessary but not central to their core products and services. But while these cloud-based companies are natural early adopters and major consumers, they are only one of the potential business markets for cloud services.
Cloud service markets

cloud_computing_2014_0012The second is the vast majority of smaller companies, from small dry cleaner chains up to regional grocery stores, and including most small-to-medium retailers and hotels and manufacturers. Most of these are privately owned, profitable but not growing, with stable local or regional markets. Computing is vital to their operational efficiency but not a source of competitive advantage, a cost of doing business rather than a profit center. And many have no reason to maintain an internal IT operation at all. Their best IT strategy is to leverage Software-as-a-Service to handle their IT needs above the desktop or these days, the tablet. This gives them access to highly efficient, secure IT services backed by professional staffs at much less cost than they can duplicate in-house. They should look to local computer support companies to provide their desktop support and keep no IT staff in-house. AWS, which has no SaaS at this time, does not play directly in this market, although its customers include cloud service providers who do. It certainly could buy and/or develop SaaS services to gain entry, much as IBM, which today has a stable of more than 100 SaaS services and growing, has.


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