性视界

Amazon in the Clouds

Amazon Web Services, the fast-growing public cloud聽development platform, has helped make Amazon the darling of Wall Street. 聽AWS has dominated the Infrastructure-as-a-Service (IaaS)聽space with an estimated 31% market share [1], and become one of Amazon’s few聽endeavors that generates聽a substantial profit margin.聽 Amazon has been notoriously tight-lipped about this highly competitive space, but recently began breaking out its financials for AWS and revealing that this once niche segment has grown into a $5 billion business[2], and reported 64% year-over-year聽growth[3].

AWS is winning in the digital economy by delivering to developers new and innovative web services at a blistering speed, and stealing business and market share from entrenched competitors who cannot keep up. AWS invented a series of entirely new markets, and is desperately being chased by competitors like Google Cloud Platform and Microsoft Azure.

Creating New Markets

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Amazon is building entirely new markets and products and releasing them quickly for developers to take advantage of. Amazon Lex, which allows developers to leverage the same natural language processing technology that powers Amazon鈥檚 digital assistant Alexa [4], has put cutting edge machine learning tools in the hands of third party developers. Furthermore, Amazon can capture considerable value from offering this service not just because it can charge developers for using the service, but also because Amazon can use the data generated by these third party applications to continue to improve its language processing abilities through data-hungry machine learning techniques.

AWS also recently launched a new service called Lambda, which allows for an entirely new 鈥渟erverless鈥� software development architecture that continues to drive down the cost of computing and makes scaling applications easier [5]. 聽Businesses can save money by never needing to pay for idle servers.聽This new market, known as Function-as-a-Service (FaaS) has quickly garnered attention and praise for it鈥檚 design, and spawned numerous聽copycat services.

Eating Old Markets

AWS hasn鈥檛 only pioneered new markets, but has disrupted countless others as it continues to dominate the cloud computing environment. AWS changed the IT cost model from one that required high up-front investments in data centers and hardware, which was time consuming, costly and difficult for businesses to manage and scale, into a model聽where businesses can set up quickly and pay only for the amount of computing services they actually use. Amazon has developed efficiencies so great聽that few businesses could build their own data centers at a better price-performance basis.[6]

Another market Amazon has entered into is the commercial high-performance database solutions market, traditionally dominated by Oracle. With their new product Aurora, Amazon聽offers customers the same performance as Oracle systems at 1/10^th the cost [7], all while eliminating the frustration of database lock-in聽by making their systems compatible with open-source database technologies. Amazon has even begun going after stalwarts such as Microsoft Office by offering competing products in the work email and document editing markets.

Poised for Further Growth

AWS is winning in the modern economy by aggressively launching new services, not being afraid of attacking rivals, and even cannibalizing its own services with new products that offer better value to customers. Developers who become familiar with AWS鈥檚 platform are unlikely to spend the time and energy required to re-familiarize themselves with a competition platform, allowing AWS to build loyalty and momentum in the IT community, and consistently keeps pace with declines in the price of computing by offering reductions in pricing on a regular basis [8].聽 Amazon continues to leverage the network effects generated by the scale of its cloud computing model, and stands poised for further dominance in this market.

References

[1] Gallo, Heather. 聽“AWS Remains Dominant Despite Microsoft and Google Growth Surges.” 聽Synergy Research Group.聽February 3rd, 2016.聽

[2] Darrow, Barb. 聽“Amazon Web Services is a $5 billion business鈥攁nd growing fast.” 聽Fortune. 聽April 23rd, 2015. 聽.

[3] Frommer, Dan. 聽“Amazon Web Services is approaching a $10 billion-a-year business.” 聽Recode. 聽April 28th, 2016. 聽

[4] Corporate Website. 聽Amazon.com. 聽

[5] 聽Janakarim, MSV. 聽“How Can Enterprises Leverage Serverless Computing Platforms.” 聽贵辞谤产别蝉.听January 31st, 2017.聽聽

[6] 聽Morgan, Timothy. 聽“A Rare Peek Into the Massive Scale of AWS.”聽Enterprise Tech.聽November 14th, 2014. 聽

[7] Corporate Website. 聽Amazon.com. 聽

[8] Mor, Yoav. 聽“Analyzing聽AWS EC2 price drops聽over the聽past聽5 Years.” 聽颁濒辞耻诲测苍.听November 15th, 2015. 聽聽