Since I started covering the online file sharing (OFS) market, the big question I get from end-users and vendors alike is "What happens if AWS enters the market?” Of course, they also ask about Google and Microsoft – these are the big three and obvious vendors to ask about, given their infrastructure, cloud offerings, and the incredible price points they can offer thanks to economies of (massive) scale. But the Google and Microsoft online file sharing solutions are already known entities, and AWS (until now) is not. That all changed on July 10th with the introduction of Zocalo, the AWS secure storage and sharing solution.
For the past couple of years, AWS has been increasingly moving up the IT solutions stack – starting way back in 2006 with its first IaaS offerings and fast forward to 2013 and AWS has a pretty broad suite of offerings from compute to networking to application services, databases, and cloud services management – even virtual desktop offerings. Zocalo is a natural extension of AWS’s portfolio – it complements WorkSpaces and positions AWS to be a key IT supplier for next-generation IT (read more about WorkSpaces from my colleague Mark Bowker here).
Think about where we are headed as modern IT evolves (wish I could take credit for these thoughts, but relying on virtualization/endpoint/mobile computing guru Mark Bowker here). IT will need to support both mobile and virtual applications, with a variety of delivery models aligned to use case and end-user requirements. It will need, across the board, instant sync and share for secure access to corporate data within IT’s control. It will need to let people work the way they want, with social collaboration features to enable and accelerate teamwork and simplify project management. It will require secure mobile access, any device, any user, any time, with single sign-on, common identity, and authentication, and allow connectivity on any network to any cloud.
Are we there yet? No. But when you look at how AWS is filling out the checklist, Zocalo takes it forward another step in the journey. Today these pieces are largely independent – but in the future they will be delivered as an integrated end-user experience, and that’s where companies like AWS, Citrix, VMware, and Microsoft have an opportunity to be the solution providers of choice.
Since we are not down that path yet, we need to consider Zocalo as a point product. It makes sense that AWS will be going after low hanging fruit here, its existing AWS enterprise install base, which numbers in the hundreds of thousands. So it has a nice user base to mine and expand that has already gotten over the hump of using a cloud service. That is an important point. Our research indicates hybrid will continue to be in high demand. A whopping 90% of the companies we surveyed say they have data that is not allowed to be stored in the cloud, and 97% of existing cloud-based OFS users are interested in deploying a solution that allows some or all of their data to reside on-premises (according to ESG Research Report, Online File Sharing and Collaboration: Deployment Model Trends, February 2014). The fact that AWS has a couple hundred thousand business names that are willing to go to a cloud service means it can target its best opportunities for success with Zocalo, and that should help them build momentum to tackle the broader market.
So what about the broader market? Near term, younger companies without big existing infrastructure investments and deeply embedded policies and processes will likely take a good look at Zocalo (as well as Box and Dropbox) – but more mature companies that want to leverage existing investments in technology will likely still gravitate to offerings like Citrix Sharefile, EMC Syncplicity, Egnyte, or Accellion Kiteworks because of their hybrid capabilities. The ability to leverage existing investments is one of the biggest drivers of hybrid OFS demand. It will be interesting to see if AWS build connectors to on-prem storage – primarily because all that on-prem stuff is a candidate to go to the cloud as it ages.
The last piece of the puzzle to consider is pricing leverage. AWS, Google, and Microsoft can offer pricing that few in the market can match thanks to economies of (massive) scale – and they are proud to pass on the savings to users. AWS tells me that they’ve had 44 price cuts since 2008.So it is clear that AWS can leverage pricing pressure to help accelerate market consolidation. I stopped counting the number of vendors in this market targeting business users when it hit 60 – it has to be well over 100. The market just can’t sustain that, so the combination of the AWS brand, infrastructure, and price leverage could be the death knell for those that have been struggling.
Of course – take this all with a grain of salt. The product is only in tech preview – this is all based on an assumption that AWS will execute against its vision. I have no reason to doubt it will – but Google Drive and Microsoft OneDrive did not impact the market as broadly as some thought (not us, other analysts J) but the point is this is not a slam dunk.
Stay tuned, I’ll be publishing a brief that goes into more detail and discusses the product – I’ll dig deeper there!