What opportunities and challenges await the new player?

What changes can be expected in the market and competitive landscape?

Here are our main comments after attending Amazon Web Services’ Italian Summit at MICO in Milan on 14 April.

1. The participants and their reactions

Most of the 1200 participants were young developers, system integrators and technical managers belonging to the new ecosystem of disruptors who are bound to change what has become the old-fashioned and by now obsolete approach to the market of their predecessors. They all seemed to be very enthusiastic about the impressive set of new tools offered by AWS, and the availability of such a powerful new platform that will enable them to interconnect their own applications with those of their customers under a strong API-based “interoperability umbrella”. In addition to these people, there were a number of CIOs and Innovation Managers who, on the basis of the case studies they presented, were  instrumental in selecting cloud software services and solutions as part of major transformation processes in their own companies, and so it is likely that they will be influencing the decisions of other major  enterprises in the next few months.

2. Together with Google, Amazon is already an established leader of the Italian cloud consumer market and now has the legitimate ambition of also becoming a leading player in the business segment.

Two major success stories:

• Enel: After the Endesa acquisition, the management decided to use the cloud to integrate the two heterogeneous information systems that they had inherited. At the time of the acquisition, only ten of the 1700 programs that had to be migrated were ready but, with the aid of AWS tools, the migration is now well advanced, making Enel the first global utility that has selected AWS as a main partner (a minor part is still covered by Softlayer). Furthermore, its next-generation metering systems will be based on the AWS platform.
• Mediaset Premium: In this case, AWS was used to provide high-quality OTT services to a large number of subscribers.

3. Opportunities and challenges for AWS:

Opportunities

• As demonstrated by these case histories, AWS can certainly significantly increase its presence on the Italian business market. Following the example of GE, which has decided to shut down  30 of its 34 global datacentres and move to the cloud, many of the decision-makers of large Italian enterprises may well look for similar improvements in terms of efficiency, rationalisation, and cost reductions.
• With its set of sophisticated tools, especially in the big data and analytics areas, AWS has an opportunity to become the ideal platform for solutions and services in the IoT environment.
• The sentence that most struck us in CIO Werner Vogels’ presentation was “APIs ARE FOREVER!”. By means of APIs, AWS can establish stable and effective interoperability among the various  software solutions adopted by its customers in am “agnostic” software environment.

Challenges

• The main  potential risk for AWS is to underestimate the potential of the Italian market and thus be unprepared to make the necessary timely investments. Last year, IBM invested $50M to build a new cloud data centre in Milan, and AWS cannot procrastinate if it wants to reap the benefits that the fourth largest European market can offer them.
• AWS customer management currently depends on a heterogeneous channel of Italian partners that is not yet fully established. AWS should quickly transform the positive “sentiment”  in a solid network of “Partner of the future”, assembled through a careful selection process, carefully trained, monitored and  managed.

4. Possible impact on the competitive scenario

If AWS plays its cards well, its impact may be significant

• Unless IBM improves its capacity to defend its installed customer base and develops a more aggressive stance to win  new customers, its market share could really suffer. What is now a major asset (i.e. the installed base of Softlayer) could become a ramp for client enterprises to migrate towards AWS. As a result, Softlayer may find itself having to face the risk of becoming a second-tier player for a number of important clients, as in the case of Enel.
• Microsoft’s strong presence in the SME Cloud market could also be jeopardised by the modularity and flexibility of AWS solutions. As things stand at the moment, the network of Microsoft partners is more solid than that of AWS but, if AWS scale up their “New Partner of the Future” channel, Microsoft’s share of the SME market may be seriously threatened.
• Finally, the entry of a strong cloud player is likely to speed up the a progressive consolidation of the Italian cloud market. The leading national and local players will have to choose to become partners of a global cloud service provider or they will find themselves being forced into increasingly limited, local and marginal market areas, and run the risk of disappearing.

by Roberto Masiero, President, The Innovation Group