Business Model<\/h2>\n
Evoking its retail value proposition, in AWS Amazon provides robust, reliable software products and cloud computing services at competitive prices. As the leading supplier in this marketplace\u2014with far more capacity than several leading competitors\u2014AWS derives significant value from its scale [4]<\/a>. Amazon has leveraged this size by repeatedly cutting AWS prices, grabbing marketshare, reinvesting in infrastructure [2]<\/a>. As shown below, the firm now operates AWS data centers around the world, with more scheduled to come online soon.<\/p>\n Beyond size, AWS also generates value through the competitive merits of its products (many of them enabled by Amazon\u2019s operating model\u2014see below). Amazon has expanded AWS far beyond EC2 and S3, with offerings that span everything from low-level computing infrastructure<\/a> and software engineering services<\/a>, to standalone software products<\/a> that compete with dominant firms like Oracle. With AWS, customers save significant resources that they would otherwise expend on expensive maintenance and management, giving them a strong incentive to conduct all of their business in Amazon\u2019s cloud.<\/p>\n Consensus once held that AWS would serve a revolving niche of small firms that would abandon the platform in favor of wholly owned data centers upon reaching scale. But the quality of AWS services, their competitive pricing, and the ability to leverage the scale of Amazon\u2019s technical infrastructure have called this into question. Netflix\u2014a voracious consumer of web traffic\u2014serves its video content with AWS [3]<\/a>. Other large and legacy organizations, from the The New York Times<\/em> [9]<\/a> to the CIA [7]<\/a>, leverage AWS to augment their digital infrastructure.<\/p>\n Despite the scale of its retail operation, Amazon has continuously sought to decentralize operations and empower small, nimble teams to solve problems. This thinking is distilled by Jeff Bezos\u2019s \u201ctwo-pizza rule\u201d that restricts teams to a size that can be fed with the aforementioned amount of food [6]<\/a>. This model of team operations first gave rise to EC2 as a tool for Amazon\u2019s internal<\/em> needs; Jeff Bezos quickly recognized its potential as an externally-facing business model [5]<\/a>.<\/p>\n Small, disparate teams raise concerns over collaboration and coordination. To solve these problems, Amazon strongly incentivizes development of APIs<\/a> for sharing data and development resources across teams [8]<\/a>. Amazon\u2019s experience designing APIs has enabled AWS\u2019s APIs to become a standard and straightforward way for customers to manage their AWS infrastructure. This approach also facilitates easy interoperability between AWS services, furthering Amazon\u2019s value proposition by enabling customers to try more of its offerings. This often results in lock-in, as customers cannot easily extricate their infrastructure from its dependencies on many interoperable Amazon products.<\/p>\n Amazon has also launched several AWS products that leverage its existing offerings. For example, Elastic MapReduce<\/a> (a solution for processing voluminous data) and Redshift<\/a> (a database for querying and analyzing similarly large datasets) both leverage EC2 for computing resources, and feature easy data importation from S3. This model\u2014enabled by the other operational processes described above\u2014allows Amazon developers to leverage existing work and develop novel services without worrying about \u201clow-level\u201d problems that other teams have already solved [8]<\/a>.<\/p>\n This operating emphasis on communication and reuse of existing infrastructure effectively makes Amazon its own customer. Though the firm\u2019s needs differ from those of its heterogeneous customers, this phenomenon ensures visibility and accountability within the decentralized firm and assists the evolution of individual services. This dynamic also enables price transparency that Amazon emphasizes in its business model: many products that leverage EC2 are priced explicitly in terms of the cost of EC2 itself.<\/p>\n AWS\u2019s market dominance is the product of business and operating model alignment. We saw above how the firm creates (and captures) value for customers, and how its operating practices support that mission. AWS\u2019s offerings and scalability are clear hallmarks of the firm that developed them. These factors have combined to give Amazon a huge stake in the future of computing and digital commerce, and mark Amazon Web Services is a \u201cwinning\u201d example of alignment between the Amazon\u2019s business and operating models.<\/p>\n The digital retailer\u2019s big bet on the cloud.<\/p>\n","protected":false},"author":444,"featured_media":2887,"comment_status":"open","ping_status":"closed","template":"","categories":[52,54,50,478,548,7],"class_list":["post-2886","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-amazon","category-amazon-web-services","category-cloud-computing","category-it-infrastructure","category-software-as-a-service","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\n![\"Map](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Global-Infrastructure-1024x580.png\")
<\/a><\/p>\nOperating Model & Alignment<\/h2>\n
Closing Thoughts<\/h2>\n
![\"Interior](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Datacenter-Interior.jpg\")
<\/a><\/p>\nSources<\/h2>\n
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Photo Sources<\/h2>\n
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