Analysis: Amazon gets help to lure big business to the cloud

Wed May 15, 2013 12:08am EDT
 
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By Alistair Barr

SAN FRANCISCO (Reuters) - As Amazon.com Inc seeks to transform itself into a leading provider of technology to the world's largest corporations, it's discovering that it needs help.

The online retailer, which since 2006 has moved aggressively into the business of renting remote computing, storage and other IT services, is roping in thousands of consulting and technology partners, from Cap Gemini SA to BMC Software Inc, in a major push to woo big-spending corporate customers to its cloud computing division.

Amazon Web Services (AWS), as the business is known, has been a hit with startups which need robust and inexpensive Web services that they can purchase as the need arises.

But big corporations and government agencies, often referred to as enterprise customers, represent a far larger opportunity: they spend more than $300 billion a year on data centers, Bernstein Research estimates.

That market opportunity has helped Amazon's stock price more than triple in the past five years as investors bet that the retailer's cloud computing services will become an integral part of the way companies do business over the Internet.

Enterprises, however, are far more demanding than start-ups, requiring better service guarantees, closer tracking of expenses, special features for regulatory compliance and much more. Thus a network of middlemen who develop solutions that work on AWS servers has become central to Amazon's strategy as it takes on established enterprise technology giants such as Oracle Corp and International Business Machines Corp and competes with newer cloud rivals Microsoft Corp and Google Inc.

"Businesses want a full dish to eat, while Amazon serves up ingredients and asks users to get cooking," said Matt McIlwain, a partner at Madrona Venture Group. "Enterprises are willing to pay to get the completed dish. Amazon recognizes this. That's why they have created a network of partners."

Madrona, headed by long-time Amazon board member Tom Alberg, has invested in a number of start-ups that help enterprises to use AWS and other cloud services, including 2nd Watch, Apptio and Skytap.   Continued...

 
A zoomed illustration image of a man looking at a computer monitor showing the logo of Amazon is seen in Vienna November 26, 2012. REUTERS/Leonhard Foeger