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After tracking down top tech execs of 10 Amazon Web Services customers and nine AWS “premier consulting partners” for interviews, Deutsche Bank analysts came away convinced that the migration to the cloud is still “the biggest and most disruptive trend in the enterprise IT market today.” Aside from “assessing macroeconomic risks to 2016 IT budgets (as) the topic du jour,” many tech execs are slowing their IT spending as they prepare to move their enterprises to the cloud, said Deutsche Bank analyst Karl Keirstead in a research note Tuesday. Keirstead questioned whether the macro headwinds that many blame for the current softness in tech spending are really at fault. “Even Tableau Software ( DATA ) cited this phenomenon,” he wrote. Tableau stock notoriously gapped down 49.5% Feb. 5, spooking investors and dragging many software stocks with it, after offering 2016 guidance that missed Wall Street expectations. Tableau stock, down a fraction, near 40, in afternoon trading in the stock market today , is more than 50% off its Feb. 4 close and 70% below its all-time high above 131 set last July. Amazon ( AMZN ) stock was up 2.5% in afternoon trading Tuesday, near 520 and 25% off its all-time high of 696.44 set in December. The runway is still enormous for cloud migration. Amazon’s AWS, Microsoft’s ( MSFT ) Azure and Alphabet’s ( GOOGL ) Google Cloud Platform combined have grown revenue to about $10 billion annually, a “tiny penetration” of the $500 billion to $1 trillion spent annually on tech services and products, Keirstead said. “The trend to AWS is clear … as more and more large enterprises are shuttering private data centers in a quest to become ‘data center independent’ and younger and smaller customers are piggy-backing on AWS as a faster and cheaper way to scale up in new geographies,” he wrote. Neutral Toward Oracle, Security Vendors The big legacy IT infrastructure vendors are feeling the brunt of the migration, he said. Those interviewed were “cautious” toward managed hosting and colocation data center vendors, neutral toward enterprise software developer Oracle ( ORCL ) and neutral (not negative) toward security vendors because “most” customers won’t rely only on AWS security, Keirstead says. “It was a mixed bag for Red Hat ( RHT ), as several of the ‘all-in’ customers seemed content to move to Amazon’s own Linux distribution,” he wrote. He said feedback was “bullish” on software-as-a-service companies Salesforce.com ( CRM ) and Workday ( WDAY ). “We now wonder if AWS is creating a tailwind for the SaaS (Software as a Service) vendors … and if the IT services vendors could get a lift as enterprises look to move or re-platform workloads to make them more cloud-friendly,” Keirstead mused. Deutsche Bank maintains buy ratings on Microsoft, Salesforce and Amazon. Salesforce is expected after the close Feb. 24 to report earnings up 36% for the January quarter. Salesforce stock was down a fraction Tuesday afternoon, near 59 and 29% off a Nov. 19 all-time high at 82.90. Rival Workday stock was up 2.5% Tuesday afternoon, near 50.50, still 48% off nearly two-year high set in October 2014. It’s scheduled Feb. 29 to report an adjusted loss of 4 cents per share for its fiscal Q4 ended in January, vs. 6 cents lost in Q4 a year earlier. Keirstead said he doesn’t doubt that macro pressure is “keeping a lid on infrastructure IT spending,” but big legacy players Cisco Systems ( CSCO ), IBM ( IBM ) and EMC ( EMC ) “have cited a ‘tough macro’ seemingly every quarter for 12-plus months, he says. “It is entirely plausible that the ongoing weakness in technology capex, private data center build-outs and hardware refresh activity is also due to ongoing structural shifts as large enterprises rethink their IT infrastructures to prepare for a transition to the public cloud model.” Scalper1 News
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