In an interview, Cloudability CEO Mat Ellis sees renewed competition for enterprise cloud customers coming. This means that Google, Microsoft, and Verizon will play larger roles, even as AWS continues to dominate.

Charles Babcock, Editor at Large, Cloud

February 5, 2016

4 Min Read
<p align="left">(Image: Andrey Prokhorov/iStockphoto)</p>

8 Ways SaaS Delivers Business Value

8 Ways SaaS Delivers Business Value


8 Ways SaaS Delivers Business Value (Click image for larger view and slideshow.)

Amazon Web Services still finds the majority of its business in charging for on-demand compute servers, but it's business is beginning to spread out in new directions, notes a third-party supplier of a cloud bill analysis service, Mat Ellis, founder and CEO of Cloudabilty.

"Three quarters of AWS customers' spend is on compute (virtual servers), with the other resources, such as storage (EBA, S3), memory, and networking as the runners up," Ellis noted in an interview with InformationWeek. But that's beginning to shift toward IT services in the form of high-level software-as-a-service (SaaS).

Amazon's Aurora and other database services made it into the Gartner Magic Quadrant last year for the first time, and Amazon's Lambda data streaming service may find many uses on an Internet of Things, Ellis said. He added that cloud database systems will be able to compete with commercial on-premises systems because they can be used by the hour and shut down when not needed. They can also scale without the company needing to invest in big database servers or permanent software licenses.

Cloudability is a third-party partner and observer of Amazon that has had an opportunity to spot the changing makeup of Amazon services consumed because it's providing billing analytics for major customers. It provides customers with more labeling in the bill than Amazon itself provides so they may better identify which departments and users are their biggest cloud consumers.

New Services

Cloudability also analyzes how much utilization customers get out of their cloud servers and whether they've provisioned as a correct match for the job. Ellis said one of its most frequently tapped services is a "concierge service" used to figure out which workloads are good to schedule as Reserved Instances, or even Spot Instances, as opposed to the higher priced On-Demand Instances.

The firm introduced a Reserved Instance Planner in 2013, for which it charges a monthly fee. The planner might be considered a counterweight to AWS's own Trusted Advisor calculator, in case you trust the advisor but wouldn't mind a second opinion.

Overall, about two-thirds of Amazon's cloud business still consists of on-demand instances charged for by the hour. Less than one-third consists of providing Reserved Instances, which represent a one-year or three-year contract at a lower per hour price.

Spot Instances, the virtual servers for which you bid at a low price, were once a tiny, experimental fragment of the mix, but now occupy a share approaching 5%, Ellis said. He doesn't like to give out precise figures on Amazon's business, because his slice of it is not necessarily representative of its business whole.

Cloudability's customers are among Amazon's largest and represent 15% of Amazon's total revenues, Ellis said. If that's correct, then Cloudability's customers accounted for $1.185 billion in spending with the leading cloud supplier. Amazon's revenues for fiscal 2015 were $7.9 billion.

The climate for using Amazon services has changed over the last two years. They've gained much wider acceptance, they're viewed as safer than they were in the past, and "now everyone knows you won't get fired for hiring Amazon," he said.

More Competition

He foresees cloud services as becoming more competitive, despite the fact that the marketplace is sometimes described as Amazon and a set of contenders dwarfed by that company's early lead and revenues.

Cloudability deals with customers using Microsoft Azure and Verizon Cloud, as well as AWS.  

Ellis also welcomed the appointment of Diane Greene, former VMware CEO, as the head of Google's restructured cloud unit. He predicted it would become more of a competitor in the future. Amazon has a large lead "but we're still in the early days of cloud computing and there's still 90% of the market to play for."

Greene will bring a firmer enterprise orientation to Google Compute Cloud.

"She'll reform the team and revise the priorities, think about a focus on enterprise customers, not boutique developers," he predicted. That may allow Google to play to its strengths, such as its "custom" server offering, where the customer provisions exactly what he or she wants instead of choosing a preconfigured server from a long list.

[Want to see what analysis Cloudability offers? Read Cloudability Sheds Light on Cloud Spending.]

Don't rule out TenCent or Alibaba in China emerging as worldwide cloud suppliers, either. Like Amazon, Microsoft, and Google, they have years of experience in building Web-based infrastructure that will serve them well as they offer cloud services.

In two years' time, he predicted, "you'll see a tremendous battle for these enterprise cloud customers."

Does your company offer the most rewarding place to work in IT? Do you know of an organization that stands out from the pack when it comes to how IT workers are treated? Make your voice heard. Submit your entry now for InformationWeek's People's Choice Award. Full details and a submission form can be found here.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

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 Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

Never Miss a Beat: Get a snapshot of the issues affecting the IT industry straight to your inbox.

You May Also Like


More Insights