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IDC Comment: Amazon Web Services Opens German Datacenter

By Andreas Olah, Matthias Zacher, Giorgio Nebuloni (@gnebuloni), David Bradshaw (@SAASeurope)

(PresseBox) (London, ) On Thursday, October 23, 2014, Amazon Web Services (AWS) opened a new regional datacenter in Germany. The new "region" is located in the Frankfurt area and offers two availability zones, and each zone has dedicated servers, storage, power and Internet connections - so any problems with one zone should not affect the other. With the existing datacenters in Ireland, this means that AWS now has two "regions" and five (three in Ireland and two in Frankfurt) availability zones in Europe.

Although AWS had been planning and equipping this new region for a while, it did not publicly announce what it was doing until today, and remains secretive about the exact datacenter locations, and whether or not the datacenters are owned by AWS or housed in colocation facilities. However, close to the public launch, some German customers were invited to run application trials using the new datacenters.

Opening a German region is an important step for AWS. In the past, AWS had been criticized for concentrating all European availability zones in Ireland. Despite the provider's ongoing efforts to reassure customers that the facilities have sufficient failover and are designed to be robust enough to cope with major disasters, IDC has heard from customers who questioned AWS' ability to deal with potential threats such as a major power outage in Ireland. By adding the Frankfurt facility, AWS not only plants its presence firmly in Europe's largest economy but provides greater redundancy for all European customers in case any of the five EU availability zones are adversely affected.

Though IDC's surveys reveal that most German user organizations do use public cloud services, they are far more sensitive than most other nationalities about allowing data (and especially personal and any type of sensitive data) to be hosted outside the country, either in cloud or other types of service like outsourcing. By opening up in Germany and, moreover, allowing customers to confine their data to Germany, AWS has opened up the market to its services.

Conspiracy theorists will object that AWS is still a U.S.-based company, and is therefore likely to be working with the NSA, willingly or otherwise. Some users may need convincing this is not the case, but we suspect that they will be a small minority.

IDC also had the opportunity to speak with JP Schmetz, chief scientist of Hubert Burda Media, a major media and online publishing company. He explained that, like many German companies, Burda Media has the policy of not permitting sensitive data to be hosted outside Germany, and the new datacenter now made it possible for his company to greatly expand its use of AWS beyond its existing usage mainly for storing publicly available images and other non-sensitive content. He also explained that, in his view, users of AWS should stop thinking of AWS as a conventional datacenter, but instead they should use it as a flexible pool of compute and storage resources to be spun up and down as and when needed.

IDC believes that a lot of demand for the Frankfurt facility could come from similar cases where data is kept within the country purely for the purpose of being able to market a German service with perceived higher levels of compliance, due to Germany's very strict data regulations, while also benefiting from some latency improvements. We also expect there to be regional benefits too from customers in other DACH countries and the CEE region to enjoy the latency benefits. However, some customers will still want to have sensitive data within their national boundaries and not Germany.

In terms of pricing, using the new German facilities will be slightly more expensive than the existing Dublin availability zones. AWS advised that this reflects higher costs for labor, power, and overheads in Germany compared with Ireland, but that the difference in prices would be less than 10%. Therefore IDC believes that some German customers may continue to use the existing Dublin region for all non-sensitive workloads and limit usage of the Frankfurt region to data that needs to remain within the country for regulatory, psychological, or latency reasons.

AWS' move is part of a broader trend for large U.S.-based cloud providers to establish direct datacenter presence within Germany - something IDC predicted at the beginning of 2014. For example, SaaS provider Salesforce.com partnered with T-Systems to use the latter's datacenter facilities in Germany, Oracle is building two German datacenters, and Microsoft is increasingly building out its Azure cloud based on its Cloud OS Network in partnership with German managed service providers T-Systems and Wortmann. VMware recently announced that it would open a German datacenter for its vCloud Air service in 1Q15, and Rackspace has plans for a DACH region datacenter.

In addition, German customers have a range of local hosters to choose from and often value higher service levels and support over lower cost - despite being more limited in capabilities compared to mega cloud operators.

In summary, although we expected that AWS would eventually open datacenters in Germany, this still comes as something of a surprise, as AWS' information blackout has been very thorough. We expect there to be very rapid growth in AWS' business in Germany, and not just because of the ability to meet local compliance needs - having datacenters in the center of Germany also significantly reduces latency for German customers. AWS has acknowledged that while its unique cloud model remains popular, German customers' preferences are better addressed in a way that integrates well with AWS' existing offerings and encourages usage of the Dublin and worldwide availability zones while having the option of keeping data within the country.

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