Ensure Ease of Recovery with Asigra’s Agentless Software

Analysis Amazon Web Services must be spun-off from its mothership to prevent it losing out on cloud customers, one analyst has argued – but a break-up could render AWS toothless, says The Reg.

The spin-off was recommended by Oppenheimer analyst Tim Horan in a report published on Monday.

Amazon's quandary, according to Horan, is that as the company expands into new areas – streaming films, e-books, devices – it bumps up against competitors who have put their infrastructure on its cloud, such as procrastination-enabler Netflix which battles Amazon in streaming media.

A paranoid company might worry that Amazon would give preferential treatment to its own products and services above those of its competitors. (Amazon, cognizant of this, has filled its site with documentation insisting that this can never happen. Unfortunately for Amazon, paranoia doesn't need to have a basis in reality.)

By splitting Amazon Web Services away from the e-retail mothership, both companies could expand without unnerving their customers, or so Horan's logic goes. They would also make oodles and oodles of cash – Horan reckons AWS could be worth $20bn in 2013, rising to $101bn by 2018 – and have a more predictable commercial existence in the long-term.

Spin-off could cause tech tailspin

The crack in this bout of crystal-ball gazing is that Oppenheimer is an investment firm that by nature likes predictable cash above everything else, and Amazon's leader Jeff Bezos is a mercurial, ambitious figure who has demonstrated time and time again a love for risky, long-term projects*.

This Reg hack believes the Oppenheimer spin-off analysis misses the temple for the gold fixtures: keeping Amazon Web Services yoked to Amazon holds a slew of major advantages, many of which could be critical in the battle for dominance of the cloud, but they will all take time to play out and are not a sure thing.

For Amazon, a spin-off would break its close links with its only major technology supplier and could lead to unpredictable rises in its own costs – a nasty proposition when the company has a penchant for running at 1 or 2 per cent margins.

Getting rid of AWS would shut Amazon off from a source of secret, high-performance tech; it's an open-secret in the industry that Amazon tests out many of AWS's in-development products, before other major customers and eventually Joe Public get a look-in.

To top it all off, although Amazon insists it is just another customer of AWS, the relationship is probably colored by the fact Amazon CEO Bezos can influence the hirings and firings within the latter organisation. Life would be more difficult for Bezos if he had no control here.

For Amazon Web Services, the spin-off would remove the valuable proving ground that is the Amazon e-retail site. Losing the ability to test and develop products for an understanding customer would be a major blow and could almost certainly lead to a higher cost of R&D – unappetizing for a business competing in an industry whose destiny is utility-like lowest-common-denominator pricing.

It's hard to find a compelling reason for Amazon to split Web Services off into another entity.

In cloud computing, controlling both the infrastructure and the software layer allows you to operate with the lowest possible costs – right now, Amazon can do both; if spun-off, it could do only one. As long as Bezos is in charge, why would it possibly do that? ®

* Bootnote

For examples of Bezos's farsightedness, see the ups and downs of his secretive Blue Origin space startup; his pivotal role in the 10,000-year-clock project via the Long Now Foundation; and indeed the formation of Amazon Web Services in the pre-YouTube early 2000s – a time when few people could imagine there to be a massive market for fungible compute power.

SaaS data loss: The problem you didn’t know you had