Hardware vendors like Dell, HP, Cisco and others have a potentially bleak future ahead of them as more and more companies move from administering their own suite of servers to using cloud-based solutions like Amazon Web Services. This story about how Yamaha went all-in on AWS should terrify these companies because they stand to lose a lot of revenue (emphasis added):

Every month, the lease for one or two of these servers would come due, and a new server sent to replace it. His infrastructure team had to back up the data, then test and install the apps to get the new server running.

It was tedious work and an expensive use of manpower.

“We said, this is not sustainable,” Thomas said.

He thought about hiring out for that work, but the bids came it at a laughable $1 million a year just for labor, and didn’t include the cost of the new servers.

So he decided to go all-in with the cloud. In November 2013, he approached several cloud computing companies including Amazon and asked for bids.

Amazon, which grew up as an ecommerce retailer, isn’t known for its enterprise sales expertise or support (though it is beefing itself up in that area).

So Amazon turned Yamaha’s request for a bid over to its partner 2nd Watch, who won the bid and then spent a year helping Yamaha move all of its data, servers and apps to AWS. 2nd Watch also provides Yamaha with ongoing cost management tools.

“I can tell on a daily basis how much infrastructure is costing us,” he explains and he and his team can then make sure that they are not overpaying.

In July 2014, all of the company’s IT, supporting some 450 employees in the US, was running on Amazon’s cloud with three exceptions:

  • The corporate accounting app Oracle enterprise resource planning app (ERP)
  • The Cisco telephone system
  • A bunch of employees’ shared files which were set up in personal drives.

He’s now in the process of moving those last items to the cloud, too. He just asked for bids from Box, Dropbox, and other file sharing companies and is working on bids for cloud versions of Cisco’s telecom services, available from Cisco, AT&T and others.

While hardware vendors will still have the opportunity to sell to the likes of Box, Dropbox, Amazon, and other cloud vendors, they will likely not be generating nearly the same amount of revenue as in the past. The number of physical devices being purchased pales in comparison to the previous years.

These companies better get ahead of this trend and start skating to where the puck will be otherwise they will find themselves out of the game altogether.