Amazon Web Services chief Andy Jassy
Amazon's cloud business—known as Amazon Web Services—launched in 2006 as a way for developers to rent access to online servers and storage.
Since then, AWS has morphed into a $2 billion Godzilla with hundreds of thousands of customers.
But it's only been recently, in about the last two years, that enterprise customers have grown comfortable with using cloud computing. They traditionally bought software and installed it on their own servers and storage in their own data centers.
While cloud computing has been a threat to traditional software makers, sending companies like SAP and Oracle into emergency mode to launch their own clouds, its been relatively good for hardware makers. Enterprises have been remaking their own data centers to work more like Amazon's cloud, buying new servers and storage to make that happen.
But, as it grows, AWS could become a threat to hardware vendors like HP, Dell and IBM and other hardware makers, Morgan Stanley analysts said in a report released Wednesday.
Morgan Stanley expects server industry revenue to "remain negative long-term." That's because big server vendors like HP, Dell and IBM are getting hit from two directions.
Not only are server sales declining as companies move more of their computing work to AWS. Cloud providers have also started building clouds using cheap custom-made servers from companies like Quanta and Wistron.
In fact, Facebook has lead a huge movement, called the Open Compute Project, to help others build low-cost custom hardware.
Storage vendors like EMC and NetApp could be hurt by cloud computing, too.
Morgan Stanley expects storage revenue to grow between zero and 5% in the future, compared to the 5% to 10% growth it has been seeing.
AWS is also taking a bite out of the $4 billion market for "server virtualization" software, which multiplies the work a single physical server can handle. This could pose problems for VMware and Citrix. They sell software for building so-called "private clouds" in data centers.
Enterprises have traditionally shunned Amazon, thinking it wasn't as safe and secure as their own data centers.
But its reputation is changing. In March, Amazon inked a $600 million deal with the CIA to build the agency its a super secure cloud.
Meanwhile, Amazon's cloud computing business should grow enormously. Amazon doesn't report AWS revenues, yet, but Morgan Stanley estimates its currently bringing in $2 billion and will hit $24 billion in 2022.
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