Table 3: Amazon's web services are major competitive threat to cloud providers such as EMC, VMWare, and Google

Amazon’s web services (AWS) are a major competitive threat to cloud providers.  AWS already has a dominant role in the arena of cloud services.   According to Gartner, “AWS has more than five times the compute capacity of its next 14 rivals combined.”  AWS offers a cheap and scalable infrastructure which is easily accessible and useable from small scale user to the largest corporations.  As confidence in the cloud increases, AWS is well positioned to capture a larger portion of corporation’s IT budgets as they transition from capital intensive physical infrastructure to cloud based services.  According to a Morgan Stanley report over the next five years, 3 percent to 17 percent of IT spending could be transferred to cloud-based service. 

AWS is currently positioned in the bottom two layers of the services stack, offering Platform as a Service and Infrastructure as a Service.  AWS’s place in the stack positions them to challenge traditional enterprise service providers such as EMS and VMWare.  The transition to the cloud will eat into the business model of storage companies such as EMC that rely on large IT expenditures as companies scale their IT infrastructure. AWS’s  DynamoDB and Redshift data warehouse, on top of the basic infrastructure, will also challenge virtualization and database companies.  AWS’s pay-as-you-go business model allows enterprise clients to fluctuate there IT spending according to business needs and business cycles. 

Due to AWS’s position as the largest player in cloud storage and their positioning in the services stack, they are ideally position to move into the “Software as a Service” layer.  A move into this layer in the service stack will allow them to capture more individual end users and small business.  A move into this layer of the stack would challenge established services such as Google AppEngine and Microsoft Office 365.  Moving forward, if Amazon decides to move into the top layer of the services stack and begins to target the end user, AWS’s structure of raw storage, organization, and compute layer will allow users to tailor the services to the specific business needs of the organization.  AWS’s pay-as-you-go model also provides an advantage over the subscription based service offered by Google and Microsoft.  If AWS made the move into SaaS they could market themselves as an One-Stop-Shop cloud platform.