Salesforce and AWS pair up: Here's what it means for cloud computing
There are five key takeaways from Salesforce's move to pick Amazon Web Services as its preferred infrastructure cloud computing vendor. Here's a look at what it means for the cloud buyer and the major players.
Diversification. Oracle will tell you that Salesforce runs on its database. That fact is true, but many of Salesforce's services run on AWS today. Heroku, SalesforceIQ and Salesforce IoT Cloud are quick examples. The AWS partnership is about infrastructure today and potentially databases tomorrow. Don't be surprised if Salesforce ultimately moves off Oracle for either open source options or AWS database services.
According to 2nd Watch, AWS's RDS (relational database service) is the No. 8 most popular service, Simple DB is No. 15 and followed by DynamoDB at No. 16. You get the picture: AWS is taking new database workloads.
IDC analyst Al Hilwa noted:
Salesforce's core CRM product runs on an internal stack in its own data centers using Oracle databases. Salesforce has acquired other technologies which use AWS most notably the public platform-as-a-service called Heroku. A commitment of this scale may well involve a gradual shift for Salesforce to diversify the stack of its core business, but this is likely to take a long time.
AWS and Salesforce can ultimately be the new IBM and SAP with a twist. For years, IBM and SAP have had a tight partnership that has revolved around hardware and software integration as well as consulting and IT services. A new age version of IBM and SAP will be AWS and Salesforce with a different spin. Technically, Salesforce has decided to build services on AWS. From an IT buying perspective, Salesforce has essentially given its seal of approval to AWS. As a result, enterprises are likely to see AWS as a go-to provider too. I'm going to bet that ultimately AWS and Salesforce evolve into a preintegrated stack for enterprises. Salesforce may even decouple infrastructure as a service from its core software as a service offerings. Today, the pricing is blended together, but more companies are going to want to bring your their own AWS to Salesforce implementations. SugarCRM already has a similar plan.
Faster international expansion. By selecting AWS as its preferred public cloud provider, Salesforce is effectively gaining access to regions so it can spin up services faster without the upfront costs. Salesforce said in its quarterly filing with the Securities and Exchange Commission:
In April 2016, the Company entered into an agreement with a third party provider for certain infrastructure services for a period of four years. The agreement provides that the Company will pay $70.0 million in fiscal 2017, $96.0 million in fiscal 2018, $108.0 million in fiscal 2019 and $126.0 million in fiscal 2020.
Salesforce is decoupling from providing infrastructure. Salesforce said it will continue to invest and support its own data centers. But let's get real: Salesforce isn't likely to be as efficient as AWS over time. The AWS-Salesforce deal is the first step toward moving more workloads to the public cloud.
Brent Bracelin, an analyst at Pacific Crest, said in a research note:
Friends don't let friends build data centers. This quote originated from an AWS enterprise customer but embodies a growing sentiment toward preferring to rent versus build the entire stack. Why build when you can rent part of the $17 billion investment AWS will have made into a global footprint of data centers and machines by year-end? Over the next five years, we estimate investments could top $50 billion if demand for its cloud services continues to rise.
AWS is getting the sales drill down. By becoming the preferred provider to Salesforce, AWS is likely to land more deals. It's only natural that AWS and Salesforce will become sales partners at some point. AWS also has similar efforts underway. For instance, Tom Siebel's C3 IoT is often riding shotgun with AWS on deals.