AWS vs. Rest

Remarks by village drunk prior to a village cock fighting contest.  ( language modified by Google Translate: Drunk -> English )

As you guys know, I am a big fan of good theory. In the management science of today, the best insights are offered by Clayton Christensen – if you haven’t read his books, do yourself a favor and read them now.

In this talk, I want to leverage two theories to explain a helpful way to look at AWS.

Theory 1: Disruptive Innovation Theory

Take a look at this diagram that illustrates the theory:

So, the mistake several of us make ( including myself initially ) was to treat AWS as a low-end disruption, meant for non mission critical mission loads. I believe its actually a new-market disruption.  Why?

Per Clayton Christensen,

New-market disruptive innovations, can occur when characteristics of existing products limit the number of potential consumers or force consumption to take place in inconvenient, centralized settings.

Previous state of the art was centralized IT setting up servers and/or virtualized infrastructure for app developers to use server and storage resources. This was both inconvenient and is centralized. Remember the pain of VMware Lab Manager?.

Secondly, parse the words of AWS executives. When they talk, they always use language such as “You could not do this before easily – we are enabling a whole set of new innovations for people that was simply not possible before”.

Is AWS a low-end disruption? No – it has been proven by many vendors that AWS is often not the cheapest IAAS option. There are many tables on the web that shows cost comparison. AWS dropping prices is not related to their attempts to being the low-cost provider – it is passing on their savings to their customers.

So, you with me so far?

Theory 2: The Resources, Processes, and Values Theory

This is the second important theory. Take a look at what this says here:

The RPV Theory

This theory is important from a competitive perspective. Does IBM, RackSpace and VMware have problem with Resources? The answer is a resounding No.

They have talented people, good technology, decent products, cash and distribution channels.

Do they have good processes? The answer is bit unclear – their product development processes can use some change to match the speed of AWS development. However, they do have great processes around Market Research and in resource allocation.

They struggle with the Values. When an exec at IBM, RackSpace of VMware looks at Cost structure, they think like typical software vendor. When they look at Income statement, they want to see million dollar contracts, not $5 / day contracts. When they look at customer demand, they do not see the demand for what AWS is offering. For examples, its unlikely they heard a demand for real-time processing of streaming data. Also, the market opportunity when looked from the existing lenses of these companies does not look very attractive.

The disconnect in values for IBM, VMware and Rackspace for the new market being created by Amazon is one reason they struggle to catch up.

The third relevant theory is Value Chain Evolution Theory. I won’t delve too much into this at this time, but it is sufficient to say that the integrated architecture of AWS is a current advantage for them. They control the entire product architecture. This is not an insurmountable obstacle for IBM, but I am just stating that the current advantage lies with AWS.

Hope you found this talk useful – express your opinion in the comments below.



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