Cervin Ventures at AWS re:Invent: What’s next for the Cloud?

October 22, 2015

We attended Amazon Web Services (AWS) re:Invent 2015 conference in Las Vegas in early October and wanted to share our four key takeaways. What started off as a niche service for start-up companies is now over a $6B cloud computing business and poised to take even more of the market share.

Here is what we took away from the annual conference:

1. Enterprise Ready

Since its inception AWS has been extremely popular amongst the startup community. However, over time enterprise businesses have become more dependent on AWS for their mission critical computer and data needs. Netflix, for one, has been a great case study for AWS to showcase how it can deliver applications at scale, with stringent performance and uptime requirements. This year Netflix participated in 8 different sessions at the conference.

One key proof point of an enterprise ready platform is when leading financial companies begin to migrate to it aggressively. In the case of AWS, both Capital One and FINRA (the Financial Industry Regulatory Authority) have adopted AWS. Capital One mentioned that they “trust the data on AWS more than that in their own data center” (See the Capital One presentation at 21:50 of Andy Jassy’s keynote). FINRA mentioned that they use their data on S3 as the “source of truth” — high praise for the security paradigm that AWS has adopted.

2. Significant Developer mindshare and Increased Pace of Innovation

Tech events like this in Vegas are usually more about the party and less about content. But the 19,000 attendees, made up mostly of developers clad in t-shirts and backpacks, were more interested in AWS’ products and less about where they were headed later that night. From our conversations with attendees, it was apparent that AWS has won the developer mindshare battle, at least in the United States.

AWS is also innovating at a rapid pace. Besides their core computer and storage services, they now have 5 databases, a Business Intelligence offering (BI), a database migration service, a big-data migration service called Snowball (where companies can transfer 1PB a week) and many others.

3. Best-in-class Cloud Economics and Scale

The economics of the cloud and the scale at which AWS is delivering efficiencies is truly impressive. The V.P. of Infrastructure at AWS discussed how his previous company’s old enterprise data centers ran at less than 20% utilization, how reliability was low, that they had required expensive servers to fix and it took 9 months to deliver capacity to developers. It was a vicious cycle.

Scale at AWS changes everything — resulting in millions of dollars in savings for enterprises. The average AWS customer uses 77% fewer servers and 84% less power, while reducing  carbon emissions by 88%. In terms of server utilization, the NRDC 2014 Data Center Efficiency Assessment shows some impressive statistics – Cloud Server Utilization is at 65% while  on-premise data centers are between 12-18%. AWS is working directly with power generation companies and is committed to renewable energy (and is piloting the Tesla batteries). In Nov. 2014, AWS committed itself to a 100% renewable energy model. They reached 25% renewable energy in April 2015, and plan to be at 40% by end of 2016.

4. Competitive Leadership

There is a real chance that AWS will run away with this market and Microsoft Azure and Google will be left fighting for second place. AWS is showing no signs of slowing down, which means all other cloud services providers will have to step up their game significantly. At a $6B run rate and growing rapidly, if AWS was an independent business, it could be north of $50B in market capitalization. At this rate, a stand-alone AWS could be one of the largest technology companies in the world!

Gartner already has listed AWS as the leader in its Infrastructure-As-A-Service (Iaas) Magic Quadrant. Other publications such as Forbes, and TechRepublic have waxed eloquently on AWS’s dominance. While the future is yet to be written, AWS is light years ahead of the competition and we see no let up in its  domination of the sector after our trip to Vegas.