Andy Jassy’s climb to Amazon’s CEO shows the growing power of the cloud

The battle for the cloud is taking place in all sectors – from video games to cars and space – and large and small companies.

For Amazon, cloud computing has been a booming and extremely profitable business. Amazon Web Services, or AWS, generated just over 10% of Amazon’s total sales in the last quarter of last year, but yielded more than half of the company’s operating profit for the period. AWS revenue increased 28% in those three months of the previous year, to $ 12.7 billion, and its operating profit was $ 3.6 billion.

For executives, the cloud is increasingly becoming a step on the corporate ladder. Microsoft CEO Satya Nadella led the software giant’s cloud business before its 2014 upgrade to the top job. International Business Machines Corp.

last year, he turned to his cloud chief when it came to appointing a new CEO to help resume growth.

The appointment of Mr. Jassy – he replaces Amazon founder Jeff Bezos as CEO in the third quarter – is particularly noteworthy because Mr. Jassy is taking over not only a technology company, but one of the largest retailers in the world.

“It shows how important the cloud is to our economy,” said Rishi Jaluria, an analyst at investment research firm DA Davidson & Co. “With Andy Jassy in charge of the entire Amazon, it shows how the company wants to bring this DNA at the core of AWS for the entire Amazon. “

The variety of tools now offered by Amazon and others through the cloud has exploded as companies in all sectors collect more data about their products, customers and employees. Cloud vendors now provide applications to, for example, help manage and analyze this treasure trove of information, increasingly using artificial intelligence software to automate processes.

Investors are increasingly rewarding companies that have embraced cloud computing and have a darker view of those struggling to adapt.

Snowflake Inc.,

a company that offers tools to help companies manage their data across multiple clouds, went public last year in a highly successful public offering. Shares, below December highs, have risen about 18% since their debut. Data analytics startup Databricks Inc. recently raised $ 1 billion, giving the San Francisco-based company a $ 28 billion valuation. Salesforce.com Inc.,

Launched more than 20 years ago as a cloud-based software company, it has become one of America’s largest providers of corporate tools and has used its growing fortune to help finance businesses, including a deal at the end of last year to buy software from collaboration at the cloud-based workplace provider Slack Technologies Inc.

Companies that took a long time to adopt the cloud are trying to reach it. Larry Ellison, founder and CEO of Oracle database provider Corp.

, previously discarded cloud computing as a fad. In recent years, Oracle has stepped up its cloud computing efforts and hired AWS employees. Mr. Ellison now regularly haunts the company’s cloud exploits on teleconferences and last year got the popular video conferencing company Zoom Video Communications Inc.

as a cloud client to enhance Oracle’s credentials.

At the start of the pandemic, when American companies shrank, the multi-year growth in cloud spending seemed to be at risk. Salesforce reduced its forecast for the entire year as it provided some customers in difficulty with a payment holiday. In April, IBM withdrew its guidance for the entire year.

But the reality was different. The pandemic has overloaded the cloud as companies have rushed to adopt tools to help them deal with remote work and other challenges during the health crisis. Microsoft’s Azure cloud before the pandemic had a slow growth rate as it gained scale. This has been reversed in recent months. Azure sales increased 50% year-over-year in the December quarter, down from 48% in the previous quarter.

“What we witnessed last year was the start of a second wave of digital transformation that has swept through all companies and all sectors,” said Nadella last month.

Amazon is the absolute leader in the cloud by sales, although companies differ in the way they calculate revenue generated through these activities. AWS had a market share of about 34% at the end of last year, according to Synergy Research Group. Microsoft came in second with a 20% share, but it has narrowed the gap, according to Synergy Research.

Amazon’s rise in the cloud has not been without challenges. In addition to increased competition, some retailers, such as Walmart Inc.

– are avoiding AWS and partnering with rivals because of concerns about giving Amazon more business and power.

The cloud is also increasingly a political minefield as it becomes more the center of the stage in daily life. Amazon last month got caught up in the question of what content to allow or block on its platform. AWS expelled the conservative social network Parler from its cloud, saying the customer did not properly police its content and did not remove content that violated Amazon’s terms of service. Parler is suing Amazon for the lawsuit.

When a House panel last year released a report on antitrust concerns around major technology companies, it said AWS provides essential infrastructure for companies that compete with Amazon. “This creates the potential for a conflict of interest in which cloud customers are forced to consider sponsoring a competitor, rather than selecting the best technology for their business,” wrote the committee. Amazon said it does not use AWS to take advantage of its retail arm.

Amazon also caught the eye of the legislator when a former employee was arrested in 2019 for orchestrating the Capital One Financial hack Corp.

Write to Aaron Tilley at [email protected]