Private cloud does not bring full benefits of cloud computing, says AWS

Amazon Web Services (AWS) senior vice-president Andy Jassy slams private cloud suppliers for failing to deliver the benefits of cloud computing

Amazon Web Services, the biggest public cloud service provider, has hit out at private cloud providers, claiming private cloud users are not achieving all the benefits of cloud computing at its first user conference AWS re: Invent.

Andy Jassy, senior vice-president at Amazon Web Services (AWS), told the AWS re: Invent conference that the full benefits of cloud computing are achievable only on a truly cloud-based service

“Beware of cloud washers,” Jassy (pictured) warned the 6,000+ delegates present at the conference. “Be careful of what is being offered under the name of cloud.”

According to AWS, high flexibility, agility and cost savings can not be fully achieved in a private cloud because it still involves huge amount of hardware investment.

“Those who are using private cloud are wasting millions on implementing hardware and then installing cloud-based software on top of it,” said Iain Gavin, director of the UK and EMEA business at AWS. “It is not really cloud.”

According to Gavin, building your own datacentre with private cloud capabilities involves guess-work, meaning enterprises will have to invest in hardware anticipating the capacity. 

“It is difficult to understand how much capacity an enterprise will need,” Gavin said.

“For example, Playfish, the London-based company that developed games for Facebook, anticipated that it will have about 250,000 users in its lifetime, but had about 8 million users in the first week,” Gavin said.

Playfish used AWS cloud services and was able to scale up its services to meet this unprecedented demand. 

“If they were on private cloud, scaling up to this level would have been almost impossible without incurring huge costs,” he said.

High-volume, low-margin business model

One of the hallmarks of cloud computing services is cost savings.

Jassy pointed out that traditional hardware and software providers – including IBM, HP and Oracle – focus on a high-margin, low-volume business model. According to AWS, traditional providers operate on a 60-70% margin.

“High-margin businesses may be a valid business model, but it is not one for us,” Jassy said.

With high economies of scale, Amazon can extend cost benefits to its public cloud customers, helping them benefit from the true advantages of cloud such as agility and cost savings, Jassy said.

“Traditional businesses don’t like our strategy because it disrupts their business,” Jassy said.

Nasdaq, which is one of AWS customers, said it chose AWS public cloud for its scalability and low costs. 

“If we were to use private cloud, we would not have been able to operate our IT infrastructure so cost-effectively,” Ted Myerson, global head of access services at Nasdaq transaction services, told Computer Weekly.

But not all experts agreed with AWS playing down private cloud. 

“Jassy is exaggerating public vs internal/private cloud. Many clients are seeing the benefits of internal/private cloud too,” said Kyle Hilgendorf, principal research analyst at Gartner.

But he added: “Jassy is right that the economics of cloud are not appealing to 'old guard' tech vendors.”

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