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AWS enterprise strategy targets industry verticals

AWS could soon add services specialized for industries such as healthcare and finance. It might be lucrative, but not everyone agrees it's a smart move.

Editor's note: This is the second article in a two-part series about AWS' move to add more prescriptive services. To read the first article, click here.

It has been speculated that, at some point, AWS might enhance its services portfolio to address vertical markets with their specific business needs.

It appears that time has come.

Tools built specifically for finance, healthcare or other industries are usually the domain of heavyweights, such as Oracle and IBM, along with throngs of smaller vendors that serve niche markets. AWS has hesitated to go down that path in the past, and it has instead focused on products that reach the broadest possible audience, but require more work by the user to develop.

But, as AWS fleshes out its enterprise strategy, it continues to add services in what it describes as a right-tool-for-the-right-job model. Doing so has created complexity, which is why AWS now provides its customers with services that offer prescriptive guidance. These efforts move AWS up the stack and could portend a further level of native specificity -- a move that could open AWS to lucrative revenue streams and roil some partners.

One of the first signs of a shift to vertical services came with the 2017 acquisition of Thinkbox, which provides content creation workflow tools for the media and entertainment industry. AWS went a step further at re:Invent when it added Amazon Comprehend Medical, a spinoff of its natural language processing service that reads medical records.

Amazon has a reputation for shaking up moribund industries, so there is room for AWS to translate that legacy to industry verticals, according to some industry observers. Fender Digital, an AWS customer, wouldn't need those types of catered services, but there's clearly an audience for them, said Michael Garski, director of software engineering at Fender in Los Angeles.

"There's room there for disruption where there are all these vendors that go in and slice and dice and do process improvement for industries," Garski said. "It's going to be interesting to see if they can adapt narrowly to industry verticals, while keeping what they're good at, which is being really broad and good generalists at technology."

If Amazon Comprehend Medical is any indicator, the healthcare market could be one of the first verticals AWS targets deeply.

"[Healthcare] is the largest piece of our economy, and there are a lot of inefficiencies," said Matt Scott, vice president of strategy and alliance at Cloudability, an AWS partner and cloud cost management vendor based in Portland, Ore.

AWS does run the risk of spreading itself too thin if it tries to tackle industry verticals as it also expands its core services. Still, executives did not shy away when asked if AWS plans to add these types of tools.

Matt Garman, AWS' vice president of compute services, said the vendor still has plenty of work to do on its core platform, but, going forward, "one of the things we'll do more of is some vertical solutions, where it makes sense."

User reticent about a move to industry verticals

Opinions on whether AWS should go this route are split, and responses vary based on how much control an enterprise wants to retain over its environment.

"There's still a place for the higher-level, IBM model [for managed business services], but it's just not the path we've chosen," said Darron Webb, vice president of IT development at T-Mobile, which relies heavily on AWS offerings. "We feel like we can innovate and disrupt better by [building and managing those applications] ourselves."

AWS should instead focus on services that help users get the most out of their resources on the platform, such as Amazon Forecast, said John Heveran, CIO of global risk solutions at Boston-based Liberty Mutual Insurance, which is also an AWS user. The AI-backed service, which was put into preview at re:Invent, does time-series forecasting to prepare users for future business demands.

"They've got tremendous skills, but that becomes a huge distraction if you get too vertically focused," Heveran said.

It remains to be seen how deeply AWS will delve into vertical markets. The company does have a small managed services business -- one that hasn't eaten into the managed service provider market the way some had feared. But it doesn't appear AWS has any plans to provide comprehensive IT consulting services broken down by industry in the near future.

"We're not an outsourcing company," Garman said.

AWS relies heavily on its partner ecosystem, and many independent software vendors already offer SaaS products on top of AWS for niche markets. It's possible Amazon could follow the same model it has with security, where it continues to add features, but leaves room for vendors to layer services on top that are easier for enterprises to consume.

Part of this could be an acknowledgement that AWS needs to adapt and address markets its competitors have tackled for years. AWS continues to have a sizable lead in the public cloud market, but this was the first re:Invent where the continued growth of Azure could be felt, said Mike Dorosh, a Gartner analyst.

"They're beginning to hear the footsteps," he said.

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