Oracle, AmberPoint, and the SOA Management ecosystem

Earlier this morning, Oracle announced it had entered into an agreement to acquire AmberPoint.  AmberPoint will be integrated and managed under Oracle’s Enterprise Manager division, and over time will be ported to the EM management framework.

For both existing customers and new prospects, this is positive news on many levels (i.e. broader/deeper capabilities after integration with EM, removing any doubts or concerns over vendor financial stability, product viability, solution’s strategic fit in the enterprise, etc).  AmberPoint will fill the gaps in Oracle’s SOA management capabilities today, and should play a key role for Oracle Cloud management in the future. With Oracle’s sales and distribution channels, AmberPoint will be able to reach new markets and extend market share.

In SOA management business, AmberPoint and SOA Software were the only key niche players left.  This acquisition puts Oracle in direct competition with SOA Software.  It will end the Oracle and SOA software partnership.  Looking forward, SOA Software is likely either going to get acquired – or - has to figure out a different product and partner strategy to compete. 

In terms of acquisition, the usual suspects for SOA Software include IBM, Microsoft, CA, HP, BMC or possibly even SAP.   Any of these vendors should be able to take their solutions and integrate them as part of a broader ESM/BSM solution.  SOA Software assets could help accelerate with that.  As far as product strategy, I think SOA Software will have to break away from just “SOA management” targeting enterprise customers into broader Cloud management also targeting Cloud service providers: self-service, asset/portfolio management, Cloud operational governance (quota, policies, SLA, billing, …) configuration, provisioning, automation…  They can do some of that on their own or go to market with new partners.

In summary, Oracle’s acquisition is definitely good for customers.  It also forces the other player to consider solutions and strategies.

Amazon’s Q4-08 report, AWS revenue, analysts, and forecasts

Despite all the catastrophic news and deteriorating economic conditions, Amazon filed another impressive Q4 earnings report last week.

For the past few months, I have been puzzled by some of the analyst estimates and predictions on Cloud Computing. For example, IDC estimates Cloud Computing market to reach $42B by 2012. According to that analysis, 2008 infrastructure as a service is valued at over $2.9B. Since Amazon is a pioneer in Cloud Computing, I decided to take a closer look at their earnings.

To understand Amazon's report, it helps to break down their business as follows:

• Amazon Marketplace – This is Amazon's retail business where they sell their own inventory + other merchants
  
• Amazon Enterprise Services (AES) – This is Amazon's consulting group that helps other retailers implement their Web channel on Amazon's sophisticated platform (i.e. Target powered by Amazon.com). There are lots of other services in this category including Fulfillment By Amazon (FBA), WebStore, etc
• Amazon Web Services (AWS) - This is where Amazon offers a range of cloud services (infrastructure, payment, analytics, etc)
  

Amazon's total revenue for 2008 was over $19B with a revenue mix as follows:

• Media – Products in this category are simple and straight forward such as books, DVDs, CDs, digital downloads, software, and video games. This was 58% of total revenue.
  
• Electronics & Other General Merchandise (EGM) - More complicated products in this category from electronics & computers à shoes & jewelry à Amazon fresh (Grocery)… This was 39% of total revenue.
• Others – AWS + AES + credit card, & advertising. This was 3% of total revenue.
  

For the last two years, Amazon has reported the following numbers in the Others category:

And, the total revenue for 2007 & 2008 in the US and abroad can be shown as follows:

Except for Q1 2008, Amazon has been doing quite well in Others. They have seen double digit growth for most quarters. The big question: what is the revenue contribution by AWS?

Here are some observations/assumptions to guesstimate AWS:

• It has been quite a while since there were any announcements about a major retailer signing up with Amazon. On Amazon's website, there are only 4 customers showcased. So, AES is probably not a major growth contributor.
  
• Advertising revenue could be a big factor especially as traffic and sales volume increase on Amazon.com.
  
• Amazon has been reporting exponential growth in S3 objects, number of developers, # images and new partnerships (i.e. Microsoft), etc, so AWS can be major contributor.
  

So, if we assumed AES & credit card to make up 20% of Others, and AWS & advertising to be each around 40%, that would make Amazon's total 2008 AWS revenue around $210M. (Just based on a set of assumptions!)

Unfortunately, there is no uniform definition around Cloud Computing yet and there are many different types of vendors that offer "cloud solutions". So, analysts projections can vary greatly.

In terms of AWS and its revenue contribution to Amazon, many believe that it has the potential to exceed Amazon's retail business in not too distant of a future.

It will be interesting to see how well AWS will do and what its contribution be by 2012, especially as more enterprise vendors like IBM, MSFT, SUN, HP intensify their focus on Cloud Computing...