Investment Firm Expects AWS Will Hit $20 Billion In Revenues By 2020

Bernstein Research has issued a research report saying it expects AWS will have an estimated $20 billion in revenues by the end of the decade. In a separate report, RW Baird & Co.?projects $10 billion in revenue for AWS by 2016 and up to $40 billion in losses from the traditional IT market. The estimates reflect Wall Street’s growing confidence in cloud services and the need that analysts see in letting their customers know that a shift is underway that will lead to continued flat revenues or even losses for enterprise companies and systems integrators. In times of disruption, something like AWS may actually exceed investment analyst projections. Conversely, AWS success is not a certainty. Technologies may advance that will flatten AWS advantages or Amazon can’t scale the group’s services fast enough to keep its edge. These are the factors that investment research houses consider when making corporate financial projections. Overall, Baird and Bernstein cite a number of reasons that account for why AWS will do so well. The reasoning is sound but not without weaknesses, such as why AWS success will be harder to come by with large enterprises. A Turning Point The public cloud reached a turning point last year. As Baird states in its report, the top 10 cloud providers grew 37 percent while more traditional technology companies grew by 2 percent. AWS does not break out its revenues. Bernstein, based on its own research, estimates that AWS grew 100 percent year-over-year. Bernstein estimates AWS is worth $24 billion, 13 times its approximate $1.8 billion in revenue (Amazon does not break out revenues for AWS). ?In contrast, Bernstein reports that Rackspace, as of April 1, trades at about 5.3 times 2012 revenue. Its revenue grew 28 percent compared year-over-year. Its public cloud service revenues of $309 million account for 23 percent of total revenues. Rackspace, it should be noted, has aggressive expansion plans of its own and has been one of the founders of OpenStack, the open cloud effort. Developer interest has grown consistently in OpenStack since its unveiling. Google is a more concerning foe with Google Compute Engine and Google Apps. And Microsoft’s Windows Azure puts the company in position to compete in the cloud space. How The Market Breaks Down Enterprise Software: Baird Analyst Steve Ashley, quoted in the AWS report, “views client/server vendors like… SAP and BMC as most likely disintermediated, and SaaS companies

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