Apple predicted to abandon Amazon Web Services for own data centers, analyst says

Posted:
in General Discussion edited February 2016
Morgan Stanley analyst Brian Nowak believes Apple is considering drawing down its reliance, or altogether dumping, Amazon Web Services in favor of an in-house solution, though the shift might take two years.


Apple's data center in Maiden, N.C.


Nowak, who covers Amazon for Morgan Stanley, cites fellow Apple analyst Katy Huberty in a recent note to investors, saying Apple's capital expenditures outlay suggests a decreased dependence on Amazon's AWS cloud computing network, reports Barron's.

"We believe this build is a signal that Apple is increasingly likely to move away from AWS in the next 18-24 months," Nowak said.

Culling data from Apple's quarterly earnings report, released last Tuesday, Huberty points to a 30 percent year-over-year jump in capex growth for 2016. During last week's investor conference call, Apple CFO Luca Maestri revealed new data centers play a major factor in this coming year's growth.

"Then we've got data centers," Maestri said. "And data centers is a growing expenditure for us, because as we mentioned in our prepared remarks, our install base of customers and devices is growing, and it's growing very significantly. And the data center capacity that we put in place is to provide the services that are tied to the install base."

Apple currently has plans to open three data centers over the next two years including a $2 billion "global command center" at the site of its failed sapphire production facility in Mesa, Arizona. Another 1.7 billion euros will be spent on two data centers in Ireland and Denmark to serve European customers.

In all, Huberty estimates Apple to be building about 2.5 million square-feet of data center space for iCloud, iTunes and supporting services. By comparison, AWS boasted 6.7 million square feet in data center capacity at the end of 2015.

A move away from AWS could save Apple billions of dollars, as Huberty estimates the company to have spent some $1 billion on data center operations last year, including fees to Amazon. For 2016 and 2017, Morgan Stanley predicts Apple to pay AWS a respective $1.05 billion and $1.18 billion in data center fees.
tallest skil
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Comments

  • Reply 1 of 41
    Self sufficiency is a good thing.
    calitallest skilmoreck[Deleted User]jbdragoncornchiplymf
  • Reply 2 of 41
    That will take a big chunk out of AWS revenue.
    tallest skilmoreck[Deleted User]jbdragoncornchiplymfpalomine
  • Reply 3 of 41
    steviestevie Posts: 956member
    People say that Apple is no good at networking and big data, but this proves them wrong.  This is going to kick Amazon's ass!
    cornchip
  • Reply 4 of 41
    OR, they will partner with IBM -- Apple's new partner and leverage there new hybrid cloud/Softlayer offerings...   

    i.e. http://www.softlayer.com
    edited February 2016 ai46cornchip
  • Reply 5 of 41
    calicali Posts: 3,495member
    I wouldn't trust an iPhoney manufacturer for s***. Good for Apple is true.

    stevie said:
    People say that Apple is no good at networking and big data, but this proves them wrong.  This is going to kick Amazon's ass!
    Apple does have IBM on their side.
    moreckcornchip
  • Reply 6 of 41
    I didn't know Amazon Web Services had OS X Server available.
  • Reply 7 of 41
    sflocalsflocal Posts: 4,385member
    Blaster said:
    I didn't know Amazon Web Services had OS X Server available.
    Is Apple even using OS X Server for any serious, heavy-duty back-end stuff?  
    Blastercornchip
  • Reply 8 of 41
    sflocal said:
    Blaster said:
    I didn't know Amazon Web Services had OS X Server available.
    Is Apple even using OS X Server for any serious, heavy-duty back-end stuff?  

    No, OSX server simply doesn't have the support or capabilities that Windows or Linux/Unix-based server farm is capable of. There's a tremendous amount of money from various companies that cumulatively far outweigh the entire worth of Apple that go into Developing Linux/Unix-based server solutions, and judging by Apple's job postings, that's exactly what the bulk of Apple's servers are.

    From 2011: Steve Jobs showed pictures inside of a Datacentre. There's brief analysis there, and that's a lot of HP hardware.
    edited February 2016
  • Reply 9 of 41
    cali said:
    I wouldn't trust an iPhoney manufacturer for s***.
    Oh, yeah. Amazon made a phone, didn’t they. I’d forgotten.
    Six weeks after the introduction of the phone to the market, its price was cut to $0.99 from $199 with a two-year contract and from $650 to $449 off contract. The price continued to drop to $130 off contract in August 2015, and eventually became unavailable on the Amazon site.


    EDIT: Ah, right. GIFs aren’t animated anymore. Spectacular.
    edited February 2016 latifbpmorecknolamacguy
  • Reply 10 of 41
    netroxnetrox Posts: 697member
    It's inevitable that Apple builds its own data center but I suspect it's also a way to stream videos at a much cheaper rate.
  • Reply 11 of 41

    EDIT: Ah, right. GIFs aren’t animated anymore. Spectacular.
    FAIL.

    (would love to post GIF but they don't get animated)
    morecknolamacguy
  • Reply 12 of 41
    ksecksec Posts: 1,543member
    DataCenter expansion is too slow. I think there is some internal discussion and fight as to Whether Apple should go All in on Cloud and Data center. As you can tell by some of their moves, hesitation and struggle. China DC partnership never went into fruit. Ireland DC was more of a political play, it is not even the size you could expect if it was serving the whole of Europe. Apple continue in using and even expanding the use of Amazon AWS and Microsoft Azure. Their CDN has been going back to Akamai. I think, it is in Apple's DNA not to go back into owning these things, like its manufacturing arm. They want to outsource it. And they seems to continue to wait for the market downturn and price competition to give them the advantage.
    I wrote the above on Jan. And as of today it is still true. It seems those R&D money aren't going into Datacenter at all. I am pretty sure Softlayer will grab some of the business from Apple soon. Apple internally has an abstracted API that allows them to use other Cloud Providers, Softlayer will likely add to that list of support. Further balancing the play between Cloud providers, much like its manufacturing arms.
  • Reply 13 of 41
    ksecksec Posts: 1,543member
    tele1234 said:
    sflocal said:
    Is Apple even using OS X Server for any serious, heavy-duty back-end stuff?  

    No, OSX server simply doesn't have the support or capabilities that Windows or Linux/Unix-based server farm is capable of. There's a tremendous amount of money from various companies that cumulatively far outweigh the entire worth of Apple that go into Developing Linux/Unix-based server solutions, and judging by Apple's job postings, that's exactly what the bulk of Apple's servers are.

    From 2011: Steve Jobs showed pictures inside of a Datacentre. There's brief analysis there, and that's a lot of HP hardware.
    They are heavy into Linux on severs and network. But what surprise me is they are not using FreeBSD which represents much more similarities to OSX.

  • Reply 14 of 41
    eightzeroeightzero Posts: 2,226member
    I had no idea Apple didn't do this already. Who knew?
    zaba
  • Reply 15 of 41
    latifbplatifbp Posts: 544member
    eightzero said:
    I had no idea Apple didn't do this already. Who knew?
    I did
  • Reply 16 of 41
    OR, they will partner with IBM -- Apple's new partner and leverage there new hybrid cloud/Softlayer offerings...   

    i.e. http://www.softlayer.com
    Softlayer used to sponsor the AI Podcast.

    On one podcast,  Victor wasn't there and Mikey was hosting it. After reading an ad copy of one of the sponsors, he said "that's a horrible copy!" on air. 

    I don't remember if it was Softlayer, but I do remember Mikey's comment and was wondering what he was thinking, saying that out aloud.
    Needless to say, I don't recall hearing that sponsor sponsoring the podcast again.
  • Reply 17 of 41
    bobschlobbobschlob Posts: 1,074member
    ksec said:
    DataCenter expansion is too slow. I think there is some internal discussion and fight as to Whether Apple should go All in on Cloud and Data center. As you can tell by some of their moves, hesitation and struggle. China DC partnership never went into fruit. Ireland DC was more of a political play, it is not even the size you could expect if it was serving the whole of Europe. Apple continue in using and even expanding the use of Amazon AWS and Microsoft Azure. Their CDN has been going back to Akamai. I think, it is in Apple's DNA not to go back into owning these things, like its manufacturing arm. They want to outsource it. And they seems to continue to wait for the market downturn and price competition to give them the advantage.
    I wrote the above on Jan. And as of today it is still true. It seems those R&D money aren't going into Datacenter at all. I am pretty sure Softlayer will grab some of the business from Apple soon. Apple internally has an abstracted API that allows them to use other Cloud Providers, Softlayer will likely add to that list of support. Further balancing the play between Cloud providers, much like its manufacturing arms.
    "Still true"?? It's a total understatement.
    Apple is so far behind in this field, given the year of 2016, it's almost unbelievable.
  • Reply 18 of 41
    misamisa Posts: 827member
    sflocal said:
    Blaster said:
    I didn't know Amazon Web Services had OS X Server available.
    Is Apple even using OS X Server for any serious, heavy-duty back-end stuff?  
    I think this is misdirection. Apple likely acquired Beats and a few other "cloud" services that they weren't doing in house before and are now migrating it to inhouse.

    The major issue with AWS is that it can only run Windows or Linux CentOS, despite it being possible to run OSX or FreeBSD on Xen, you don't have that option because it's not Mac Hardware, thus it would violate Apple's own terms. 

    Which is to say, I'm wondering what hardware Apple has been using for it's own servers since the old Xserve systems (discontinued in 2004) and Mac Pro's should have been retired by now. The 2008-2012 models are the only models that can run the current version of OS X. And no, I don't think you're your going to see the cylinder version of the Mac Pro in a data center. MacMini's are not going to cut it.

  • Reply 19 of 41
    Rayz2016Rayz2016 Posts: 4,555member
    eightzero said:
    I had no idea Apple didn't do this already. Who knew?
    Everyone else. 
    edited February 2016 cnocbui
  • Reply 20 of 41
    bobschlob said:
    ksec said:
    I wrote the above on Jan. And as of today it is still true. It seems those R&D money aren't going into Datacenter at all. I am pretty sure Softlayer will grab some of the business from Apple soon. Apple internally has an abstracted API that allows them to use other Cloud Providers, Softlayer will likely add to that list of support. Further balancing the play between Cloud providers, much like its manufacturing arms.
    "Still true"?? It's a total understatement.
    Apple is so far behind in this field, given the year of 2016, it's almost unbelievable.
    They chose to focus on the things they knew well and like manufacturing, allow others to provide if they remain good partners. There may be a deeper story in this as Amazon was a great partner like Google and Samsung that was not competing with them. Well that changed. What are the chances Amazon is holding back tech or service support levels to maintain their edge. It's unfortunate that everytime Apple has an outage it's a big deal and they get compared to Amazon, but they actually use Amazon for those services. Unfortunately it takes a lot more time to plan, design and build a international data center network and bring it online than writing software like maps. Microsoft, Google and Samsung used their partnerships with Apple to facilitate their success at Apple's expense and Amazon may be the latest to force Apple to just do it themselves since they will get the blame anyway. A good friend used to say "Nobody will take care or your stuff like toy will".

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