Is Amazon Web Services’ Price Cut an Enterprise Category Killer?

Amazon Web Services’ (AWS) big news of dropping its price by up to 80% for its dedicated Elastic Compute Cloud (EC2) Instances has rattled the market this week. While the news should definitely get the attention of competing private cloud providers like Microsoft Azure, Google and Rackspace, does it really represent a viable option for an enterprise user’s core data center need?  The simple answer is: No.

First a little background, the AWS EC2 platform provides resizable compute capacity within a dedicated or shared cloud environment.  This results in unparalleled flexibility and the ability to ramp your compute needs up or down on a “pay as you go” basis.  Sounds Utopian, right?  In reality though, there’s no free lunch and for established enterprise companies with a solid base computing need, the numbers just don’t add-up.

For example, enterprise users with a core 1,000 kW compute need and a floating requirement of 250 kW, would be subject to, in effect, paying retail pricing across the entirety of the 1,250 kW rather than the alternative of placing their core, stable 1,000 kW need in a wholesale colocation environment. This would reduce the total cost by 15-25% with the user either looking to the Cloud for the smaller variable portion or negotiating an accordion provision with their wholesale provider for this need.

Utilizing this hybrid approach provides enterprise IT users with stability and control unique to the wholesale offering; including a secure, private environment, dedicated and professional facility operations, robust and reliable power and cooling infrastructure, control over inlet temperature and complete flexibility over hardware and software specifications, to name a few.

The reality of the situation is that as companies continue to experience unprecedented growth in IT demand, it is becoming increasingly important to seek out solutions that provide both reliability and flexibility while also keeping costs at a minimum.  The wholesale colocation option provides all of the benefits of owning your own data center without the significant capital outlay or the constraint of being locked-in for the long term. The Cloud definitely has a place on the menu, but at this point in its development, the smart play for the established enterprise isn’t to look at it as the main course, but rather to use it as the seasoning that makes the entire meal taste better.