Amazon-Accenture Tieup Threatens IBM, HP in Tech Services

  • Venture will help Amazon land new and larger contracts
  • Services could one day be bigger than Amazon e-commerce unit

Amazon.com Inc. and consulting giant Accenture Plc are teaming up to provide cloud-based technology services to businesses, catapulting the Web retailer further into territory long dominated by companies such as HP and IBM.

The new venture, announced Wednesday at an Amazon event in Las Vegas, will be staffed by Amazon and Accenture employees, who’ll design new services and help corporations shift technology operations to the cloud.

Working with Accenture will help Amazon land new and larger services contracts. That may pose a bigger threat to traditional computer-services companies such as Hewlett-Packard Co. and International Business Machines Corp. as corporations look for cheaper and more efficient ways to outsource management of their technology.

“The HPs, the Oracles, the Dells, have already had a relationship to Accenture & Co.,” Holger Mueller, principal analyst at Constellation Research, said in an interview. “This is why it’s so important for Amazon to get these relationships now. They have to become more like a shrink-wrapped platform for business users.”

Big Ambitions

While Amazon Web Services -- commonly known as AWS -- now generates only about 8 percent of annual revenue, Amazon has big ambitions for the division. Andy Jassy, who runs the unit, has said it could one day be bigger than Amazon’s traditional e-commerce unit. Many of AWS’s individual products are seeing their usage -- which fuels revenues -- almost double, year on year, according to Jassy.

"Do I think cloud technology is here to stay in an ever-increasing way?" Omar Abbosh, Accenture’s chief strategy officer, said in an interview. “One hundred percent.”

Established almost a decade ago, AWS has been working closely with customers to tailor its services to their needs. Infor, an enterprise software company, began exploring AWS’s capabilities five years ago and gave Amazon a list of about 100 services it needed the company to deliver.

“They went through the list and delivered every single one,” said Pam Murphy, Infor’s chief operating officer.


Flexible Contracts

Infor shut down all of its data centers and last year based itself entirely on AWS. Murphy says the addition of more consulting firms will help Infor serve clients’ ever-increasing demands.

As Amazon brings Big Five consulting firms such as Accenture on board, more and more companies could be tempted to ditch traditional IT services companies for AWS, which offers more flexible contract terms.

To compete, the likes of HP and IBM have had to build up their own cloud services offerings and stop infighting between their sales organizations, which tend to squabble over cloud versus traditional contracts, said Brian Gracely, an analyst at Wikibon.

“Most of the traditional vendors haven’t figured a way to change their compensation model,” he said.

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