Next Big Thing In Cloud Computing Puts Amazon And Its Peers On The Edge

Edge computing deploys data processing, storage and networking close to sensors and where other data originate. The goal is to process and analyze data locally in real time rather than send it to faraway data centers in the internet cloud and wait for a response of, say, 150 milliseconds.

That sliver of time matters in some applications: A self-driving car that needs to detect a pedestrian or storm-damaged sign. A doctor who performs remote surgery using augmented reality tools. A video surveillance system equipped with facial recognition to identify a known shoplifter or terror suspect. Sensors that detect repairs needed on robotic arms in factories and oilfield pumps.

Edge computing is the next step that companies like Amazon.com (AMZN) are taking to expand the cloud. Incumbents mean to protect millions or billions of dollars in their revenue from poaching by edge upstarts. Companies new and old are developing relevant hardware and software.

“I’m convinced edge computing is here to stay,” said Marco Argenti, vice president of technology for Amazon Web Services. “It’s a natural evolution. Not all data needs to be transferred to the cloud to be processed. There might be bandwidth costs, cellular costs or it may be difficult to connect to the cloud. Or, you just need to react really fast, like in the case of a robot.”

That’s what Texas-based Hangar is thinking. It has teamed with Vapor IO, which makes mini data centers, to bring cloud computing closer to drones, making them more nimble. The mini data centers will be housed at the bottom of cellphone towers and other spots near where the drones fly.

“We’re building our entire technology platform to operate in a future where we don’t need people in the loop,” said Jacob Rachniowski, Hangar’s director of enterprise solutions.

Cloud Computing, Decentralized

Centralized cloud computing could soon be old hat. Today’s internet “cloud” is made up of huge racks of computer servers packed into data centers. Some 200 warehouse-size, high-performance, “hyperscale” data centers span the U.S., says Synergy Research Group.

They’re operated by Amazon, Microsoft (MSFT), Alphabet’s (GOOGL) Google, Apple (AAPL), Facebook (FB) and other tech companies as well as data center firms like Equinix (EQIX).

A number of startups — including Vapor IO, EdgeMicro, Cloudflare, Packet and others — aim to challenge these giants and make edge computing a reality.

Many incumbents in the tech industry are investing in edge computing. Among them are Dell Technologies (DVMT), Hewlett Packard Enterprise (HPE), Crown Castle (CCI), Cisco Systems(CSCO) and wireless firms Verizon Communications (VZ) and AT&T (T).

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Amazon, Microsoft and Google are the biggest providers of public cloud computing services. But powerhouse Amazon Web Services, or AWS, also offers edge computing software and services, primarily for web-connected devices on what is called the Internet of Things.

“Our philosophy is that edge is really an extension of the cloud, down to the tiniest device. There is no edge without the cloud — otherwise you’re going back 15 years,” Amazon Web Services’ Argenti told IBD

Cloud Computing Revenue At Risk

But the idea is that data collected on the edge supposedly will be parsed for what’s most important, and the rest will be sent to the cloud. The idea is to cut down on what’s eventually sent to centralized clouds, saving time and money.

The big question is how much data processing will take place locally rather than being crunched at giant data centers. Revenue could shift to edge computing companies from the cloud’s current leaders.

Amazon’s cloud computing revenue is nearing a $25 billion annual run rate. And AWS revenue popped 49% in the June quarter.

Microsoft’s Azure cloud computing services exceeds $9.8 billion in revenue while a similar Google venture tops $3.6 billion, says a Jefferies report. Data center tech providers — such as chipmaker Nvidia (NVDA) and equipment maker Arista Networks (ANET) — have a stake in how edge computing evolves.

Some expect the demise of centralized cloud computing. Peter Levine, managing partner at venture firm Andreessen Horowitz, predicted in a late 2016 video presentation that new edge apps “will obviate cloud computing as we know it.”

Edge Computing ‘Will Eat The Cloud’

Gartner Group, in a 2017 report, predicted that “The Edge Will Eat the Cloud.”

“The edge will create some serious winners and losers, both in terms of vendors and businesses,” said Thomas Bittman, a Gartner analyst, in a blog post.

But John Apostolopoulos, vice president of Cisco’s enterprise networking business, sees plenty of growth ahead for both centralized cloud computing and edge computing.

“The pie is going to expand dramatically,” he said. “The cloud is going to continue being important and it’s going to grow. The edge, though, is going to grow much more than it has in the past and create a lot of value for customers. It’s not going to be one or the other.”

Apostolopoulos points to retailers like Walmart(WMT) as an example. With edge computing, he says they’ll be able to bring cloudlike software applications to hundreds of stores “at the push of a button.” The retail apps would process data from store cameras or sensor networks locally.

Walmart is building its own internal cloud network as its rivalry with Amazon heats up.

Traditional cloud services will keep growing as large companies move business workloads to AWS, Microsoft’s Azure and other services, analysts say. Many emerging apps such as video surveillance will require the massive, data-crunching power of centralized cloud computing. – Investors Business Daily