The infrastructure rich keep getting richer, and that’s just fine, according to Amazon CTO Werner Vogel. As he declared at AWS Summit NYC last week, “infrastructure… is not a differentiator” for the enterprises and startups that keep buying servers to fill their own data centers. Given that Amazon has better scale and operational efficiency, Vogel’s argument goes, there’s no reason to continue trying to reinvent a wheel better built and operated by Amazon.
Self-serving? Sure. But true? Very likely, yes.
Amazon To Enterprise IT: Fall In Line
As much as enterprise IT may like to pat itself on the back for operational excellence, and naysayers like to point to Amazon Web Services’ occasional outages, the reality is that AWS uptime is at least as good as that of enterprise IT, and arguably better. Even more pertinently, regardless of enterprise IT’s claims, whether valid or not, developers and others are going to consider using public clouds like AWS. It’s too convenient for them to ignore.
As Vogels argues:
“You have to stop wasting time and effort for things that do not matter for your customer. One of those things is your infrastructure. It is not a differentiator… [Our quest for efficiencies] helps you with economies of scale and drives our costs down. We’ve made the decision to pass those benefits back to you [in reduced costs]… If we are able to drive the cost of this compute and storage down to a point where you no longer have to think about it, tremendous products are going to be built. You will no longer be constrained by your infrastructure.”
It’s a compelling vision. But is it correct for all companies, all of the time?
The Infrastructure Rich Get Richer
Google doesn’t seem to think so. As GigaOm‘s Derrick Harris points out, Google spent $1.2 billion on infrastructure in the last quarter, which represents a 20% jump over its infrastructure spend ($1.02 billion) in the previous quarter. Google clearly feels that infrastructure helps to differentiate it.
Or ask Microsoft, which has spent $15 billion on its data centers.
The same holds true for Zynga, which used to run 80% of its business on AWS but announced in 2011 that it would be moving to its own private cloud for most of its operations. By 2012 80% of its game activity was running on its private zCloud, with only 20% still hosted on AWS.
While there are some companies – Netflix stands out among them – that continue to run on AWS at large scale, it seems that many enterprises feel that infrastructure does matter. At least, at a certain scale.
However, my guess is that most of these don’t truly appreciate why their infrastructure matters. While Zynga argued it could save money by going to a private cloud given its scale, the real value of running one’s own data center isn’t a cost advantage. It’s a competitive advantage, but only when infrastructure is considered a profit center, not a cost center.
Making Data An Essential Aspect Of One’s Business
Tim O’Reilly honed in on this point back in 2010, arguing that back-end infrastructure becomes critical to controlling front-end user experiences:
“We are once again approaching the point at which the Faustian bargain will be made: simply use our facilities, and the complexity will go away… We’re entering a modern version of ‘the Great Game,’ the rivalry to control the narrow passes to the promised future of computing… This rivalry is seen most acutely in mobile applications that rely on internet services as back-ends.”
We’re already see data, and its underlying data centers, become an advantage for Google, Facebook and other new-breed tech companies, while the legacy tech vendors have become a “rust belt” of sorts, to use The Wall Street Journal‘s phrase. But data isn’t merely an advantage for so-called tech companies.
Data powers the rise of more effective trading strategies for Financial Services firms. It enables better patient care in Healthcare. It wrings efficiencies from supply chains in Retail. Indeed, data is finally taking shape as the driving force for business in the Twenty-first Century.
So Do You Need A Data Center?
Which brings us back to Amazon. Most enterprises – even large ones – aren’t running at a scale where their data-driven applications can’t be managed in the cloud, be it Amazon’s, Google’s, Rackspace’s or someone else’s. Indeed, I suspect that many, if not most, applications currently running behind an enterprise firewall could conceivably be run in the public cloud.
But as we’ve seen with Zynga, at a certain size many companies are going to see advantages to running their own infrastructure. Not to lower costs, though they may well find that they can operate their data centers more efficiently than Amazon. But, rather, to increase control of how the manage their data centers to capture, manage, process and put to use data.
Yes, even stodgy old insurance, manufacturing and other “old world” companies. Facebook, after all, is a social media company. Google is a search and advertising company. Zynga helps people play games. And Amazon? It sells books. And yet each of these non-tech tech companies feels that infrastructure is critical. At least, at scale.
Image courtesy of Shutterstock.