Few outsiders noticed that Amazon, a well-known online technology department store, expanded its web services business to Australia in 2012. The Australian Securities and Investments Commission released data last week that showed Amazon Web Services has grown. From an Australian business worth A$1 Million in 2011 to one worth A$25 Million in 2012.
One of Amazon’s fastest growing areas of business is providing technology resources. That underpin many of the internet’s most well-known names like Pinterest, Reddit and Foursquare. It now includes major Australian brands like Fairfax, MYOB Suncorp, Suncorp, and Commonwealth Bank.
Amazon Web Services is a part of Amazon’s future. It is also part of a larger trend that disrupts and changes. The way businesses use computers and the technology supporting them. This is bad news to companies like IBM, HP, and Dell who have made their living selling physical boxes qq online.
Cloud computing works on a simple principle. Cloud computing is a way to get rid of the need to buy dedicated computers and keep them in a room. Instead, you can use virtual computers, which are provided by the cloud provider. These virtual computers can be found in data centers around the globe.
The physical aspect of cloud computing is not important to the user. Cloud computing has many advantages over owning, managing and buying your own data center. Cloud computing is cost-effective because you don’t have to pay upfront for hardware, setup, or a management facility. Pay only for what you use and add to it as your needs change.
Amazon Web Services, for example, allows users to indicate that they would like to use computing. Resources when it is less expensive. Companies such as IBM, which have made a living selling computer hardware. Are already seeing the effects of their falling sales figures. IBM’s hardware sales declined by 17% in the last quarter compared to the same quarter a decade ago. This was the continuation of five quarters of declining revenue.
Similar stories have been told by HP and other hardware companies. Their enterprise sales have been steadily declining with server and storage revenue. Falling in the last quarter by around 10% compared to the previous year.
Companies like IBM, which have a vested financial interest in maintaining the status quo for their employees. Had long turned a blinder to cloud computing and the rapid rise of cloud service providers like Amazon and Microsoft. IBM has responded by launching a rapidly expanding cloud platform business. Which reportedly generated US$1billion in revenue in the third quarter. However, this comes at the expense of operations and the loss of hardware sales.
Virtualisation technology has made cloud computing possible. This allows multiple virtual computers to run on a single computer. This approach has many advantages. Physical computers rarely work at their full potential, so it is possible to run multiple. Virtual computers from one physical computer. Computer data centres are also constrained by limited space and the increasing need for power and cooling. Many data centres are unable to afford the power they require. This issue is partially addressed by virtualisation, which allows for expansion without increasing the demand for power and space.
VMWare, a pioneer in virtualisation technology, has overseen the transformation corporate data centers from single-computer boxes to fully virtualized data centres. VMWare holds 60% of the software virtualization market. However, customers have made it easier to move their data centres from physical boxes running single computers to fully virtualised cloud-based data centres. VMWare, like the hardware vendors, is trying to offer a cloud-based service. However, just as IBM, moving customers to the cloud can result in lost revenue.
Cloud computing is becoming more popular every day, and this means that the future for companies that rely on selling hardware and the associated services looks increasingly grim. As with everything cloudy, innovation is not always easy and there are many potential obstacles for this industry.
Non-US users of US cloud computing services have been concerned about data sovereignty. It is a serious risk to store company data on computers that could fall under US law, or allow easy access for US security services. Although companies like Amazon and Microsoft have set up data centers outside the US in an effort to address this problem, it is unlikely that these facilities will be able to protect Australian or European companies from US lawmakers.
Like all disruptive technological innovations it is gradual. It is unlikely that everyone will suddenly move all their data centers to the cloud. Recent research showed that the vast majority of small and medium-sized businesses were still working to virtualize their existing computing infrastructure. The transition to the cloud will be slower due to the amount of investment made in these changes. However, cloud service providers have a bright future in a world in which most organizations will eventually use cloud computing in some capacity.