) scrambled to get servers back up and running last week after
several crashed unexpectedly bringing down a handful of well known
websites. While its cloud computing business accounts for less than
3% of our
$181 estimated stock value for Amazon
, this incident could partially impair Amazon's reputation as a
could service provider and serve as a setback in the perceived
reliability of cloud computing services. The company competes with
) in the online retail market and Google (
), Microsoft (
) and Salesforce.com (
) in the cloud services market.
Our price estimate of $181
is inline with the current market price.
Cloud vs. On-Premise Computing at a Glance
- On-premise software is the traditional enterprise software
model, which requires each customer to install, configure, manage
and maintain the software on their in-house hardware.
- Cloud-based (on-demand) software is delivered remotely
over the Internet on an as-needed basis with little or no
implementation services required and without the need to install
and manage third-party software in-house.
Cloud Computing Gains Momentum
Cloud computing has gained popularity over the last few years
due to lower total cost of ownership and cost-effective benefits
for customers, and the speed and ease of implementation.
Salesforce.com is a pure cloud computing player and provides
customer relationship management (
) services online. Due to the momentum shown by the cloud computing
market, Salesforce.com has gained share in the CRM market in the
past, with non-pure cloud players like SAP (SAP) showing
slower growth in this market.
See our full analysis and $116 price estimate for
..But Risks Present
This brings us back to our initial view that the recent crash of
Amazon servers could give some customers pause in deciding to roll
out cloud based services or move their servers to the cloud from
costly in-house solutions. Amazon is an industry leader, and if it
has these kinds of mishaps, then surely any cloud players is
susceptible to a similar crash.
In the near-term, Amazon may actually benefit as
customers using cloud based solutions, such as cloud based servers,
as these customers may look to add additional servers to mirror the
existing ones to ensure that a similar crash will not down their
systems. While this might provide some solace to Amazon, this
occurrence could taint the perceived reliability of cloud based and
See our full analysis for Amazon.