November 23, 2023
With cloud spending under scrutiny, generating the most value from AWS investments while still delivering the innovation enterprises demand is crucial. To achieve their goals through AWS, enterprises need to consider strategic alignment, cost optimization, technical implementation, organizational readiness, and continuous improvement. Learn the key questions stakeholders should ask when evaluating their AWS cloud strategy in this blog.
As AWS re:Invent 2023 rapidly nears, cautious optimism has replaced the blissful ignorance that once characterized enterprise cloud spending. Enterprises, for justifiable reasons, are scrutinizing every dollar allocated to the cloud, and cost optimization is leading conversations across the board.
This muted atmosphere has slowed AWS’ revenue growth in recent quarters, reflecting the broader enterprise cloud adoption slowdown. In the third quarter of 2023, AWS reported US$23.1 billion in revenue, up 12% year-on-year, but the growth rate was below the company’s typical historical increases in the mid-20 to low-30% range.
Despite these cloud spending challenges, Everest Group research shows that enterprises still understand the need to innovate and expand their operations through cloud-driven digital transformation. Amidst prevailing economic and geopolitical uncertainties, enterprises are seeking to innovate and grow by carefully evaluating their cloud strategy.
The duality of cautious spending sentiment and continuously evolving customer expectations facing digital businesses has brought AWS to a crucial juncture. As Amazon’s Chief Financial Officer Brian Olsavsky pointed out during the third quarter 2023 earnings call, this has put the division in “a delicate situation.” Let’s explore how AWS is managing this.
AWS helps enterprises differentiate through innovation and partnership
AWS continues to be the leading cloud service provider, with a strong record of innovation, a large and loyal customer base, and a vast and active developer community.
In our research, enterprises have highlighted these key AWS differentiations:
- Continued investments in strengthening IaaS offerings: Since its inception, enterprises have chosen AWS IaaS offerings for their comprehensiveness and reliability across foundational infrastructure components such as compute, network, and storage. Its secure, scalable, and global infrastructure services, along with its comprehensive capacity management tools, have made it a strong enterprise choice. Additionally, AWS’ continued innovations in building next-gen silicon chips help it support enterprises with critical Artificial Intelligence/Machine Learning (AI/ML) and high-performance computing (HPC) workloads
- End-to-end data on cloud capabilities: With the renewed focus on data to drive AI’s future, enterprises are looking for data integration, governance, and analytics capabilities to address data privacy challenges, improve customer experience, and drive business growth. With offerings such as Amazon Aurora, DynamoDB, and RedShift, AWS dominates enterprise adoption trends for cloud-native data platforms and data analytics. Further, AWS has also become relevant for enterprises seeking to accurately address data regulation and compliance demands
- Comprehensive partner ecosystem and AWS Marketplace popularity: The AWS partner ecosystem is a comprehensive and ever-evolving network of system integrators (SIs) and technology vendors. As a result of its strong partnerships with technology vendors and tiered classification of SIs, enterprises find AWS beneficial for identifying and enabling successful integrations across different platforms and tools through a tripartite engagement model. AWS also provides an alternate way to engage with multiple system integrators and independent software vendors (ISV) through its extremely popular AWS Marketplace to enable cost savings and procurement efficiencies, reduce licensing costs, and fulfill enterprise AWS commit
Enterprises need AWS to solve for transparency and empower cloud value
AWS’ revenue growth decline can be attributed to several factors, including the economic slowdown, cloud computing market maturation, and increased cloud provider competition.
Enterprises have highlighted the following challenges in their AWS engagements:
- Commitment to consumption gap: Enterprises continue to get caught in the vicious cycle of overcommitment and underutilization. This has led to a significant waste of money and has made it difficult for enterprises to control cloud costs
- Complex contracts and commercials: Enterprises have often struggled with inflexible AWS cost structures with complex caveats that lead to potential budget overruns
- Cost management and visibility concerns: AWS’ current cost optimization offerings do not completely offer a solution for inefficient resource allocation and underutilization. This creates strong concerns about return on investments (RoI) among enterprises
- Standalone professional services: AWS ProServe teams lack cohesiveness with SI teams during collaborative engagements, preventing enterprises from realizing the maximum potential value. This disconnect has led to inefficiencies, delays, and communication breakdowns, ultimately hindering project objectives
In addition to the above challenges, enterprises have underscored common cloud service provider challenges around integrating with legacy systems, talent shortage, vendor lock-in, and offerings complexity.
Deriving the desired value from AWS requires careful enterprise planning
Enterprises must adopt a right-fit approach for cloud engagements and workloads present on AWS. Choosing a strategic cloud service provider by mapping key business and technical requirements with the strengths of various providers is highly likely to prevail as the next differentiating factor for mature enterprises in the future.
To develop a clear understanding of how AWS can help them achieve their goals, enterprises need to consider strategic alignment, cost optimization, technical implementation, organizational readiness, and continuous improvement.
For instance, enterprise stakeholders considering how AWS can help achieve the desired value from generative AI (Gen AI) should ask:
Strategic alignment:
- How do AWS’ Gen AI capabilities align with the overall IT strategy and business goals?
- How can AWS’ Gen AI services help achieve desired outcomes such as increased automation, improved decision-making, or enhanced customer experiences?
Cost optimization:
- How can the cost of Gen AI workloads on AWS be effectively managed?
- What are the different pricing models for AWS services related to AI and Gen AI, such as Amazon Bedrock, Amazon SageMaker, Amazon Rekognition, and Amazon Comprehend?
Technical implementation:
- What is the optimal approach to deploy and manage Gen AI models on AWS?
- How can the security and compliance of Gen AI applications be ensured on AWS?
- How can AI and Gen AI applications be integrated with other AWS services such as Amazon S3, Amazon DynamoDB, and Amazon CloudWatch?
Organizational readiness:
- What skills and training are required to develop, deploy, and manage Gen AI applications on AWS?
- How can clear governance policies and guidelines for Gen AI usage on AWS be established?
Continuous improvement:
- What is the best method to continuously monitor, evaluate, and refine the performance of AWS Gen AI workloads?
- How can the ROI in AWS’ Gen AI solutions be maximized?
By addressing these specific questions, enterprises can comprehensively understand how AWS can empower them to achieve their strategic objectives, optimize their cloud investments, and derive the most value from AWS.
To discuss maximizing the value from AWS and cloud spending, contact [email protected] and [email protected].
Learn more about the AWS services market, including trends, demand drivers, and key considerations for enterprises.
