Amazon Moves Into Germany - InformationWeek
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10/24/2014
11:47 AM
Charles Babcock
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Amazon Moves Into Germany

On the heels of a losing third quarter, AWS opens a new data center in Frankfurt, Germany -- and the global stakes are high.

Tech In Far-Flung Settings
Tech In Far-Flung Settings
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Amazon Web Services is launching cloud services from a new European data center in Frankfurt, Germany. The new facility is the company's second European computing center; the other is in Dublin, Ireland. The two represent a separate European region in what is now a constellation of 11 AWS facilities.

With its new region, Amazon is bowing to two new realities. One is that Microsoft, AT&T, CenturyLink, Verizon, VMware, and other public cloud suppliers are building global networks of data centers, since cloud data centers that are closer to customers offer better response times. To maintain its position as the cloud market leader, AWS must pick up the pace of going global. It fell behind Microsoft last year in China, with its service there still in "limited preview."

The second reality is that many European companies no longer want their data on cloud servers based in the US following Edward Snowden's revelations of NSA spying. Germany would scarcely be Amazon's first choice for a new location, given its ongoing difficulties with German trade unions as it attempts to build retail distribution facilities there. But Amazon had little choice in the matter. Germany boasts Europe's strongest economy, and German law states that whatever data originates there must remain within its borders.

[Want to learn more about Amazon's "limited preview" in China? See Why Amazon Faces Challenges In China.]

Both land and office space are in short supply in Germany, and they come with high price tags. Parent company Amazon.com could hardly have welcomed the bills coming out of Germany this past quarter as it lost $170 million on the beleaguered Amazon Fire Phone (currently rated at two stars out of five on Amazon.com). The company's total loss for its third quarter -- $437 million -- was larger than analysts expected when it reported results Oct. 23.

Amazon's competition is getting savvier as well. Earlier this month Microsoft announced a new D series of big-memory virtual machines, outpacing Amazon's own lineup. Microsoft's new VMs offer more power CPUs and twice the memory of the largest Amazon Web Services virtual machine, according to Scott Guthrie, Microsoft's executive VP for cloud and enterprise. Sensing an Amazon weak point (AWS charges for high rates of I/Os), Microsoft also threw in a storage option with its D series that guarantees 50,000 I/O operations a second.

In addition to increasing the server stakes, Microsoft, Google, and CenturyLink also pledged to match Amazon's pricing, tarnishing its longstanding position as the industry's price leader.

Meanwhile, low-end suppliers offer a host of different challenges. Both DigitalOcean and Atlantic.net are offering virtual servers that power up quickly and execute high speed I/Os, in part thanks to the solid state disks assigned to them. Amazon will have to do some retooling to compete on that front as well.

Amazon's telecom rivals, such as CenturyLink, NTT, Verizon, and AT&T, are beginning to understand the advantages of owning a global network of private lines and are offering them as secure means of access to their data centers. AWS has offered DirectConnect through Equinix and selected other data centers, but its points of access are outnumbered by the extensive resources of the telecoms. To fight that, Amazon has had to enter an agreement with competitor AT&T.

But the main reason AWS is now in Frankfurt was highlighted by Helmut Krcmar, chair of information systems at Technical University of Munich, whose department frequently works with German international companies. "Many have been holding off moving sensitive workloads to the cloud until they had computing and service facilities on German soil," Krcmar explained, "and this [new region from AWS] could help them comply with their internal processes."

This attitude may dictate additional European regions, depending on how much business AWS wants to do with security-minded French, Italian, or Spanish companies. Amazon is still a dominant player in cloud services and a formidable competitor to its challengers. But its margin for investment is narrowing, while the stakes needed to play on a global scale continue to increase.

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Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio
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ChrisMurphy
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ChrisMurphy,
User Rank: Author
10/27/2014 | 7:59:39 AM
Re: Frankfurt has two Availability Zones
You particularly hear this sort of geographic concerns from companies such as banks. I wrote earlier this year about Bank of America's efforts to create a more flexible infrastructure, and these rules related to data control and geography are one reason they're exploring data center containers -- to quickly put up and take down private cloud data centers. (They weren't sold, at least at that time, on the economics and security of public cloud environments like this, btw) 
Technocrati
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Technocrati,
User Rank: Ninja
10/24/2014 | 10:26:46 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden

@Laurianne    I see.   I thought these numbers had to be revealed in corporate reports ...financial statement ...etc.   But I could be wrong.

Technocrati
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Technocrati,
User Rank: Ninja
10/24/2014 | 10:21:57 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden

"...Since it appears spying on data happens on a global scale without much restraint, you might have no place to locate."

 

 

@Thomas  Claburn     Awesome observation !    So sad but true !   

Charlie Babcock
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Charlie Babcock,
User Rank: Author
10/24/2014 | 6:09:22 PM
Frankfurt has two Availability Zones
The Frankfurt AWS center has two Availability Zones, the minimum needed for best cloud practices. The recovery system runs in a second zone, one that has a power supply and communications separate from the primary zone. In addition, customers can connect to the Dublin center if they want data recovery or disaster recovery capabilities in a different region, Andy Jassy, senior VP, said in announcement.  
Thomas Claburn
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Thomas Claburn,
User Rank: Author
10/24/2014 | 6:05:00 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden
>If I were a CEO and could choose were to put offices, I'd choose a country that neither dictates where to store data or that spies on my information.

Since it appears spying on data happens on a global scale without much restraint, you might have no place to locate.
Laurianne
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Laurianne,
User Rank: Author
10/24/2014 | 4:22:59 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden
I think Doug is right about the Ireland angle. As to the actual $, Amazon continues to be cagey about how much from what parts of the business -- the estimating among analysts is quite heated -- so we don't know the cloud revenue picture.
Technocrati
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Technocrati,
User Rank: Ninja
10/24/2014 | 1:44:06 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden

Forcing outside companies to invest and employ Germans is pretty much a standard practice for Germans - like it or not the German government looks out for  the economics of most situations and how their  citizens can gain therefrom.    

 

Not so unlike most any other economic power.

Technocrati
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Technocrati,
User Rank: Ninja
10/24/2014 | 1:38:09 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden

"...the Snowden revelations would cost the U.S. cloud industry 112 billion Euros or about $136 billion over the next three years." 

 

@Charlie Babcock    And yet all Snowden wants is a fair trial.  

Technocrati
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Technocrati,
User Rank: Ninja
10/24/2014 | 1:35:36 PM
AWS : Trouble Ahead ?

There looks to be some challenging times ahead for AWS.   Is this a major revenue source for Amazon now ?   I know they have invested  considerable resources behind this but I still get the feeling their online sales is still their main revenue catalyst.

D. Henschen
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D. Henschen,
User Rank: Author
10/24/2014 | 1:23:15 PM
Re: U.S. cloud vendors shot in foot by NSA, Snowden
It's clear that U.S. tech businesses have been impacted by the revelations of NSA's spying, but I'm not sure how Forrester is counting the losses. Amazon, like Salesforce.com and others, is opening data centers in Germany, but is that a loss of business for these U.S.-based companies or just an additional cost? If we treat this as a zero-sum game (which it's not), did Amazon's new German data center take away jobs from its U.S. data centers or the one in Ireland? I'd argue this means less growth in Ireland in the case of Amazon.

Look out cloud vendors. Hopefully other countries won't copy Germany's model and come up with data-center-employment-acts of their own. Germany might be able to get away with it, but it only increases the cost of doing business in that country. If I were a CEO and could choose were to put offices, I'd choose a country that neither dictates where to store data or that spies on my information.
Page 1 / 2   >   >>
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