Morgan Stanley: AWS a threat to all IT

Amazon Web Services (AWS) is a threat to almost all areas of IT and should be able to reach $24 billion (£15.78 billion) in revenue by 2022, according to a new report by seven Morgan Stanley analysts, led by Scott Devitt.

The report points to AWS’ application of “retail economics” to the IT sector as the reason the company is emerging as an “IT mega-vendor”.

The company, which offers scalable Infrastructure-as-a-Service (IaaS) products for businesses on a subscription basis, has repeatedly dropped its prices in a price war with rivals such as Google, Microsoft and Dropbox.

This “continual downward pressure”, as well as an ability to produce greater scale in computing tasks, have been key to the company’s success, Devitt suggests.

The team believes AWS could impact between 3 and 17 per cent of traditional IT spending, by giving companies the ability to move back end tasks to the cloud.

The traditional IT areas most likely to be swallowed up by AWS are compute, storage networking, and outsourcing, according to the researchers.

“To the extent companies move workloads from private cloud type environments to AWS, the $4B virtualisation market could face headwinds. Most at threat [are] VMWare and Red Hat.

“AWS’ Relational Database Service often leverages existing MySQL, Oracle or SQL Server functionality, however a shift towards NoSQL database’s [sic] like AWS’ DynamoDB or SimpleDB presents a longer-term threat [to those companies],” the analysts said.

However, hardware vendors such as Cisco Systems and Juniper Networks appear to be safe at the moment, it was claimed.

“Longer-term, [the] datacentre switching market may be negatively impacted due to ‘carrierfication’ as smaller customers are replaced with AWS, which has greater purchasing power. However, no evidence exists that branded equipment is being replaced by white label, home grown switches,” the team said.