Saturday, July 26, 2014

Amazon Web Services Won't Dominate Cloud Computing

Back in 2013, when the the hype about cloud computing and big data was gathering steam, we wrote,

"Unfortunately, none of this really makes it any clearer who is going to carry the day as far as supporting the migration of mega-cap, public multinational corporations to a public cloud computing infrastructure. Will one or more of these companies really want their entire IT infrastructure to reside with a bookseller and operator of global merchandise bazaars?"

Last week, the theory that Amazon Web Services would be the growth and earnings engine for the company was called into question. Data security, risk management, documentation and mitigation of breaches will weigh more heavily on CIOs, particularly in health care and financial services, than saving a few nominal bucks by outsourcing data storage and applications.

Amazon seems to be replacing Apple as the cult stock du jour.  It continues to rate Buy recommendations from major brokerage houses based on long-term dividend discount models that generate huge enterprise values in the indefinite future.  Amazon seems to have corporate ADD.  It touts a business, generates revenue and headlines, loses interest or focus, and then lavishes money on the next, new thing.  Typically, investors don't like this shell game, but Amazon moves on arrogant, uncommunicative and undeterred.

Basic outsourcing of IT services, renting servers and hosting applications, is indeed a commodity aspect of the cloud computing opportunity, and as such it should be the least interesting to investors.

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