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 In the end, the deal survived only after Taser dropped Amazon.com
Inc as the data storage provider for the year-long project. The fact
that Amazon did not have a data center in Britain was a deal breaker
for British officials, according to Taser.
The case is an example of the challenges that Amazon faces as it
works to expand its cloud computing business, known as Amazon Web
Services (AWS). In cloud computing, clients store and process data
on remote servers accessed by the Internet, as opposed to storing
information in local servers.
Since Edward Snowden exposed the vast reach of the U.S. National
Security Agency's surveillance programs 18 months ago, government
agencies and companies around the world have been evaluating where
they keep their most sensitive data.
Some larger companies have grown wary of relying too heavily on
Amazon's public cloud servers, preferring to store data on their own
premises or work with cloud providers that can offer them the option
of dedicated servers - the so-called "private cloud" model,
technology consultants say.
That has opened a door for rivals such as Microsoft Corp, which has
won over some companies by giving them more direct oversight of
their data in the cloud.
"Edward Snowden did more to create a future with many clouds in many
locations than any tech company has done," said Steve Herrod, the
former chief technology officer of VMware Inc, now a venture
capitalist at General Catalyst Partners.
A web of new laws restricting how data can move across national
borders creates another hurdle for Amazon, the largest U.S. online
retailer.
Amazon "must be definitely more localized," said Gordon Muehl, chief
technology officer of security for German business software maker
SAP.
For now, Muehl said he does not expect SAP to work with Amazon on
many upcoming projects due partly to data-location issues.
Amazon said demand for AWS, including in Europe and Asia, has never
been stronger, and that any contracts lost to rivals are the extreme
exception, not the rule.
The company plans to build data centers in every large country over
time, according to AWS chief Andy Jassy. But doing so will take time
and incur considerable expense, analysts said.
NARROWING ADVANTAGE
Amazon pioneered cloud computing in 2006 and quickly amassed a wide
base of customers by hosting data in its own centers rather than
clients' own. This spared many startups from the high cost of
managing their own computer servers.
Executives have said they expect AWS to one day be more valuable
than Amazon's $70 billion retail arm.
Since its launch, AWS has amassed five times the computing capacity
of its next 14 rivals, including Microsoft, Google Inc and IBM,
according to Gartner. Jefferies estimates that AWS revenue will more
than double from 2014 levels to $10.5 billion in 2017, faster than
the market overall.
But while Amazon remains dominant, its advantage is also narrowing.
According to Synergy Research Group, AWS held a 27 percent market
share in the third quarter of 2014, compared to 10 percent for
Microsoft's Azure cloud business. Azure, however, grew 136 percent
on a rolling annualized basis in the quarter, while AWS grew 56
percent, according to Synergy.
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Microsoft is willing to work with third-party data center managers,
such as Fujitsu Ltd or Outsourcery Plc, when clients are required to
keep data within a country's borders.
The software company is also willing to help companies add cloud
capabilities to their existing data centers, a "hybrid" model that
Amazon has only just started to offer.
"Having a hybrid cloud does provide an advantage over AWS," said
Garth Fort, general manager of Microsoft's cloud and enterprise
marketing. "Privacy, security and compliance are important areas
that businesses consider when they make the move to the cloud."
About six months ago, a small team at the British bank Barclays Plc
selected Azure over AWS to power some development and testing work,
two people familiar with the project said.
The team picked Azure because of its private-cloud option, along
with Barclays' existing familiarity with Microsoft's data-center
software, the people said. A Barclays spokesman declined immediate
comment.
Microsoft can draw on the corporate and government relationships it
has cultivated over decades to peddle Azure, experts said. AWS has
only just started to build such ties.
"The name Microsoft is helpful in dealing with large insurance
companies," said Patricia Renzi, who runs the life technology
solutions unit for Milliman, an actuarial firm which sells
applications to insurance company clients.
Many of those insurance companies, which crunch data to produce
financial risk models, are in Europe and already work with
Microsoft. Amazon does not have that advantage, Renzi said.
Amazon Chief Technology Officer Werner Vogels said AWS's public
cloud meets the security needs for most customers, including banks,
drug companies and government institutions. Many of those companies
can move large chunks of services to AWS while keeping control of
core functions themselves, he said.
"It's not an all or nothing story," Vogels said in an interview last
month.
(Additional reporting by Steve Slater in London; Editing by Sarah
McBride, Peter Henderson and Tiffany Wu)
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