Did Amazon just nuke enterprise private clouds?

Did Amazon just nuke enterprise private clouds?

Summary: AWS is now saying that you can do private cloud by default in EC2. The upshot: It may be bit harder for rivals to pitch servers, storage and networking gear with AWS lurking in the background.


Amazon Web Services has included virtual private clouds into its EC2 instances in a move that may render the marketing pitches of a lot of hardware companies moot. At the very least, AWS threw a virtual curveball to its physical data center rivals.

In a blog post, AWS outlined that ever EC2 customer will have advanced networking and features included in its Virtual Private Cloud service. Earlier: Amazon dominates cloud infrastructure market - but new challengers emerging | Amazon to set up new EC2 customers on private cloud

AWS noted:

To enable this, starting soon, instances for new AWS customers (and existing customers launching in new Regions) will be launched into the "EC2-VPC" platform. We are currently in the process of enabling this feature, one Region at a time, starting with the Asia Pacific (Sydney) and South America (São Paulo) Regions. We expect these roll-outs to occur over the next several weeks.



AWS has plenty of other details about how it's combining VPCs and EC2, but the first ripple in the market will be felt immediately and revolve around messaging. As cloud computing has developed in the enterprise, there are roughly three camps that have emerged.

  1. First, there's the pure cloud club. Vendors such as AWS, Salesforce and Google have a clear message that hugging and managing servers is just silly.
  2. Then there's the private cloud approach. Hardware vendors, who happen to sell servers and gear that goes into a data center, argue that the cloud is a delivery model. Enterprises need to be secure and control their data and data centers. The solution is to buy next-gen gear and appliances to deliver a private cloud to the enterprise. You'll hear a variation of this argument from a lot of players---IBM, HP, EMC, VMware, Cisco, Oracle to name just a few. Companies in the pure cloud camp mock the idea that the cloud means buying servers.
  3. Meanwhile, there's a hybrid cloud camp that aims to mix and match private clouds and public clouds. In other words, companies will toggle between cloud flavors. Hybrid clouds rhyme with the reality most companies will face. 

Speaking at a Piper Jaffray investor conference on Tuesday, Steve Caniano, vice president of hosting, application and cloud services at AT&T Business Solutions, outlined the differences between the cloud flavors:

What we are starting to see is that, as customers create new applications, as they look to expand or globalize their businesses, there is a need to go beyond your data center. At some point, you have to look as well to what's your core competency and where you want to focus your limited resources and look at service providers as well for part of that solution. And that creates inherently a hybrid type configuration where you need to tie different solutions together. You probably, if you are a large enough company, will have your own data center of some sort. So you will use a service provider like us for a dedicated deployment...

The largest customers out there, the Global 500, may have large enough IT shops and investments in physical data center assets that, in those instances, they may do some of their own running of a data center. More and more so, and especially I think as you move below that segment of the market, customers are not about wanting to run data centers. That is not a core competency that most customers have quite frankly; it is not a good use of their capital.

What's unclear is whether AWS' latest move changes the private cloud equation. AWS is now saying that you can do private cloud by default. It might be a bit harder to pitch servers, storage and networking gear with AWS lurking in the background. Make no mistake: AWS can be very disruptive to the enterprise technology establishment. Aside from a development pace that's fast, AWS isn't going to sweat profit margins. That means players with huge margins are ultimately going to race to the bottom against a man---Amazon CEO Jeff Bezos---who seems to love thin profit margins.



Topics: CXO, Cloud, Data Centers, Hardware, Networking, Servers, Storage

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  • Of course they didn't just nuke it.

    They nuked it some time ago, when it became hard to articulate any reason why a midrange or smaller business would be better off with on-premise datacenters than pay-as-you-use AWS.
  • ROI for mid sized businesses still shows the Cloud is too expenive

    I run the Operations and IT for a small to mid size software/service business: about 150 people. We buy our own hardware and lease space in datacenters, what you guys are calling the 'dead' or 'silly' model.

    Call it what you want, but I do the math several times a year: hosting all of it ourselves on reliable hardware (nice, not bargain basement servers) is FAR cheaper than hosting with even the cheapest cloud provider(s). I include all of the CapEx and OpEx costs of running our infrastructure that consists of nearly 700 VMs and 200+ physical servers across 4 datacenters. Every time I do the real math, doing it all in the Cloud would cost us 2-5x more. My FTE requirements wouldn't really change because we only spend the equivalent of one full time person managing all of the physical infrastructure in tasks that wouldn't also be necessary for the Cloud, and in reality we would just be replacing managing physical systems with managing all that comes with a particular cloud provider. We spend the majority of our time like companies in the cloud do: DevOps-type work with scripting, systems automation, coding, etc that's the same regardless of how you deploy.

    In the real world, where most companies live, augmentation is the pragmatic, most cost-effective approach. This, as opposed to this marketing hype driven world filled with 'cloud' companies driving propaganda to convince companies to abandon their infrastructure to save their jobs and souls. Do the numbers and pay others to do what would cost you more to do, its simple business. For example, paying CDN providers not much more than basic bandwidth pricing to help deliver your content across the globe without having to build datacenters/POPs everywhere.

    Letting cloud companies or ZDNet convince you that hosting your own hardware is stupid or a thing of the past is just another snake oil sales technique to get more money out of your wallet. Don't be lazy, RUN THE NUMBERS. Often you'll find that once your monthly AWS bill exceeds $30-40k, you should just buy the hardware and lease datacenter space yourself, and your ROI will come in 2 years or less.
    • Rightly So...

      It really depends if your current network topology and business risk can benefit from moving to the cloud (cost benefit analysis) - not to mention the cloud deployment model.

      So if you know you're gonna scale like crazy and need to control your variable costs, cloud is the way to go (time to launch reduced, etc). But for some business that already have their OPEX controlled with on-premises with no forecast to scale abruptly, stay on-premise.

      There ARE savings, BTW. Companies that are NOT like yours have shown a reduction.