Since Amazon revealed the result of its Cloud service business in April, its stock is up 68%, which means a $124 billion increase in stock market value. Wall Street probably failed to assess how rapidly this corporation replaced its data centres and serve farms with brand-new cloud service.
Analysts and investors are working to consider the flip side of Amazon’s cloud success — possibly surprisingly bad news for traditional IT giants like IBM or Hewlett Packard Enterprise. They say they are going to cut back on their stocks and bonds of the lagging players as there might be an accelerating downward cycle.
Rahim Shad, tech analyst at fund manager Invesco said some of these were predictable but how quickly all these were happening was unpredictable. That pace might surprise the HP’s, the Dell’s, the EMC’s.
Noting the explosive growth of the winning cloud company, Matt Sabel, manager of the MFS Technology Fund (MTCAX) viewed: “it’s all coming at the expense of the traditional IT companies out there”. His fund held Facebook, Google and Amazon as its top 3 positions, which accounted for 22% of its asset by the end of September. On the contrary, no shares of IBM is held, while HP and EMC comprised about only 4% of the fund.
Last week, the trend finally hit home when the directors of IT dep. of some of the largest U.S-based corporations indicated their strategies to move operations into the cloud.
For example, Jim Fowler, General Electric (GE) CIO said at Oracle World last month that this behemoth could reduce the cost of operating an important oil and gas application over 90% by shifting to the cloud. There has just been one in five application at GE run in the cloud but by 2020, the figure will reach 70%.
What’s more, Alan Boehme, Coca-Cola’s (KO) CTO, at the Web Summit in Dublin presented that as their data centres had had plenty of serves, lots of cost and using a great deal of energy, there was little likelihood that they would have a promising future. Though they always believed that Big Blue, HP, Dell, the major corporations could help them get to the future, now everything has changed. “Again we can’t do that anymore — the world is changing too quickly”, said Boehme.
For the first quarter of the fiscal year, Amazon’s web services unit has reported revenue of $5.4 billion, 70% higher than the last year. In a recent report of Deutsche Bank, sales is predicted to exceed $10b next year and $16b in 2017. Analysts said that even though Google and Microsoft didn’t disclose their sales, they might be on a much smaller scale.