I think the issue is more that Amazon has figured out how to generate a marginal dollar of revenue at a far lower cost than the established vendors. The R.W. Baird analysis, which indicated that every AWS revenue dollar results in three or four lost dollars by established vendors, shows how much less efficient those vendors are than Amazon. Frankly, one doesn't see any dramatic response on the horizon to Amazon's efficiency, so the dynamic of every AWS revenue dollar displacing multiple vendor dollars is likely to continue into the foreseeable future.
After running through these calculations, I was left with one question: How big will AWS have to be in order to be considered a credible enterprise offering?
At the current rate of growth, if you accept Citi's estimate of AWS's current size, it will surpass VMware total revenues sometime next year. Is that big enough? Or how about two years later when, according to Baird, AWS will be a $10 billion business? I think it's fair to say that Amazon is nowhere near done disrupting the IT industry.
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