Amazon Web Services (AWS) stands accused of overstating the competitive threat posed to its business by enterprises repatriating workloads to on-premise datacentres.
In a recent submission to the Competition and Markets Authority’s (CMA) ongoing investigation into the inner workings of the UK cloud infrastructure market, the public cloud giant flagged enterprises wanting to migrate back to on-premise datacentres as a threat to its business.
And, according to AWS, it is a competitive threat that the CMA needs to take into account while conducting its investigation into whether anti-competitive behaviour is prevalent within the cloud infrastructure services market.
“The market investigation’s narrow focus on cloud services does not contextualise the role of those [on-premise] services within the IT services market … and in [AWS’s] opinion, the evidence provided by the CMA … and any finding for the adverse effect to competition could not withstand scrutiny,” said AWS, in a hearing summary published by the CMA on 16 September 2024.
The summary document went on to report AWS’s view that there is “fierce competition in the cloud market” and customers have “more choice than ever before” about where to host their workloads, with the hyperscaler pointing out that cloud services “make up around 15% of the IT services market as a whole”.
The perception that once customers move to the cloud they never return to on-premises is not correct Amazon Web Services
AWS also stated that “the perception that once customers move to the cloud, they never return to on-premises is not correct”, and for that reason, the scope of the CMA’s investigation should be considered too narrow.
“Ten to 20 years ago, customers needed to make a massive capital investment, spanning multiple months and years, to migrate or switch [between] on-premises datacentre providers, whereas today there is fierce competition in the cloud market and customers have more choice than ever before,” AWS continued.
Elsewhere in the document, AWS restated that its cloud business is competing against enterprises wanting to move their applications and workloads back on-premise, despite the “significant effort” this process involves.
“AWS said its cloud business faces competition from on-premises IT and provided examples of customers moving from the cloud back to on-premises IT solutions,” the document continued.
“AWS noted that building a datacentre requires significant effort, so the fact that customers are doing it highlights the level of flexibility that they have and the attractiveness of moving back on-premises.”
AWS exaggerating on-premise competition
However, there is a feeling among cloud market stakeholders that AWS is overstating how big a competitive threat on-premise environments pose to its business.
Owen Sayers, an independent security consultant and enterprise architect with over 20 years’ experience in delivering national policing systems, said one only needs to compare the growth in hyperscale datacentre developments to enterprise-sized builds to pick holes in AWS’s claims.
“In the UK, the only major datacentre investments of late have been to service social media giants or hyperscalers,” he told JP. “AWS are building castles and data palaces while UK providers and SMEs are scrabbling around in the dirt, fighting for scraps.”
There are always exceptions, but we don’t consider repatriation to be a trend Ed Anderson, Gartner
Speaking to JP, Ed Anderson, distinguished vice-president and analyst at IT market watcher Gartner, backed this view and said instances of enterprises repatriating their workloads from the cloud remain few and far between.
“Of course, there are always exceptions, but we don’t consider repatriation to be a trend,” he said. “As organisations evolve their use of technology to support their business needs, they consider the technology architectures that best meet those needs. In most cases, this results in a mix of cloud and on-premises datacentre solutions.”
Gartner is forecasting growth for both cloud and datacentre markets, Anderson continued, but with “cloud growth notably outpacing datacentre growth”.
“[This is] consistent with the trend we see of enterprise workloads continuing to be deployed in cloud environments,” he added.
“Whenever an enterprise considers alternatives in their IT purchase decisions, including the cloud services offered by AWS, Microsoft and Google, it represents a type of competitive threat … but cloud markets are healthy and growing, with the leading cloud providers well-positioned to capture much of that growth.”
Anderson’s colleague, Lydia Leong, distinguished vice-president analyst at Gartner, reiterated that cloud repatriation is not a trend the company is seeing in the enterprise market, whereas something that is occurring with increasing regularity is “lift and shift” migrations to the public cloud.
“There is no broad trend of ‘cloud migration reversal’ – it’s quite the opposite. As organisations react to the Broadcom acquisition of VMware, they are strongly considering lift-and-shift cloud migration, even though it is well-established that such migrations are suboptimal and historically have not resulted in cost savings.”
