As Jeff Bezos leaves office, Amazon bets its future on the cloud

As Jeff Bezos leaves office, Amazon bets its future on the cloud

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“When you find one of these, don’t just swipe right, get married,” he wrote. Several Amazon businesses fit this profile, he added. Seven years later, this proved to be true, but perhaps nothing more than Amazon Web Services.

In the seven years since Bezos wrote that letter, AWS operating revenue has skyrocketed 1,950%, compared to about 715% revenue growth in other Amazon business units combined.

AWS’s growth came under the leadership of Andy Jassy, ​​the 24-year-old Amazon veteran who helped the company pioneer cloud computing and oversaw AWS’s rise to the top of the increasingly competitive cloud market.

This market is expected to expand further, as the pandemic has accelerated the shift of many the expensive and inefficient business of operating your own servers. Jassy told CNN in December that “virtually all vertical business segments are being reinvented as we speak,” thanks to the cloud.
Jeff Bezos is stepping down as CEO of Amazon
And as Bezos prepares to transfer the post of CEO from Amazon to Jassy, ​​the company is signaling that the cloud will play a key role in its future.

While it is obvious that AWS has been Amazon’s future since at least 2015, “it just closes the deal,” said James McQuivey, principal analyst at Forrester.

“This business grows faster, it scales faster,” said McQuivey. “If you just add up – yes, a lot of people need to buy things, they need to watch things online, they need to ask Alexa what the temperature is out there – but infinitely more people are touched every day by cloud services.”

The future of AWS

Jassy was there when Amazon decided to launch AWS as a separate company that served Amazon.com exactly as it would any external customer.

“In the beginning, many of those same companies would despise the cloud and say that no one would use it for something interesting,” said Jassy in a 2019 CNN documentary on Amazon’s history. Analysts now say AWS is on track to raise $ 50 billion in sales each year.

And Jassy’s experience with AWS’s growth makes it a good option for dealing with the scale of the company as a whole, experts say.

“Few people on the planet have the ability to manage the hypergrowth machine that Amazon has been [better] than Andy Jassy, ​​”said Nicholas McQuire, vice president of business research at CCS Insight.” And then, of course, you add the most important thing: the ingrained culture and the leadership aspects from within Amazon, which it obviously shows and has proven to be. ”

And as a former head of the cloud, Jassy is well positioned to understand how to integrate AWS more effectively with other Amazon offerings for continued growth, analysts say.

“He will understand the importance of all assets, as opposed to historically AWS being just a minor thing that was tedious and generating revenue,” said McQuire.

Not only is growth in the cloud market accelerating, Amazon now has to defend its exaggerated market share against increasingly fierce competitors, especially Microsoft (MSFT) Azure. While Amazon Web Services’ year-over-year revenue growth during the three months ending in December accelerated from the beginning of the year to 28%, Azure revenue grew 50% year-over-year during the fourth quarter.

Amazon is expected to increase capital spending on cloud infrastructure by 11% by 2021, “to reduce the risk that AWS will run out of capacity due to the strong demand for cloud they are seeing,” according to Katy Huberty, an analyst at Morgan Stanley.

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“We see this as a big step in the cloud arms race with rival Microsoft,” Dan Ives, an analyst at Wedbush, said in a note to investors on Tuesday. “Jassy is an undisputed titan of the cloud and has been a key force in bringing AWS to the top of the cloud mountain for the past decade. That said, we believe the tide is changing in the cloud arms race as Microsoft … is winning the market share vs. AWS. ”

A big question now is who will take charge of AWS in its next growth phase. One possibility is Matt Garman, who was promoted last year to AWS ‘primary sales and marketing function after serving as vice president of computing services for the division for seven years.

“He is very well regarded in the business, understands the technology, particularly the infrastructure side of the business, which is essential to AWS strengths in the market,” said McQuire of Garman.

Amazon’s future challenges

As he transitions from AWS leadership to running a larger company, Jassy will go into some big shoes – and some big challenges.

Between them, Jassy defended one of Amazon’s most controversial products: Rekognition facial recognition software.

Amazon generally does not identify its Rekognition customers, but in the past they have included police departments, according to company statements. Amazon said in June that it would stop offering Rekognition to police departments for a year, amid a wave of similar moves by major technology companies, which considered concerns about the potential of facial recognition for inaccuracy and bias.
Jassy said in an interview with Frontline in 2019 that the company “never had any misuse of law enforcement using facial recognition technology” and that “simply because the technology can be abused in some way does not mean you should ban it. either condemn it or not use it. “He also said the company would sell the controversial AI application to foreign governments (but added that Amazon would not sell the software to governments to which it cannot legally sell).
“It seems very likely that Amazon will now double its surveillance-based business model,” said Evan Greer, deputy director of the digital rights non-profit organization Fight for the Future. “He’s kind of saying, ‘Let’s wait and see if something bad happens’, but if he were listening, he would know that bad things have already happened.”

Greer added the Amazon business The model is largely based on surveillance – from knowing what you buy and what you ask from Alexa to the data collected via Rekognition and its Ring bells. “This data is where your power comes from,” she said.

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The leadership transition also occurs at a time when Amazon’s workforce is mobilizing around worker safety issues, after nearly 20,000 of its U.S. frontline employees contracted the coronavirus in September 2020. Thousands of Amazon warehouse workers at an Alabama facility are expected to vote next month to unionize, potentially paving the way for the company’s first US-based union. Analysts said growing pressure for organized labor could be costly for Amazon.
The e-commerce giant also faces increasing regulatory scrutiny related to the sheer size of its businesses. Bezos appeared in Congress alongside other Big Tech CEOs last summer to testify at an antitrust hearing, where he was asked about Amazon’s approach to pricing, acquisitions and how it uses data from third-party vendors. And last month, the alternative social media platform Parler sued Amazon after being shut down, alleging, among other things, an antitrust violation.

Jassy could be the right person to address these concerns because of his experience in convincing some of the world’s largest companies and government agencies to entrust their crucial digital infrastructure to Amazon, said McQuire of CCS Insight.

“He understands the importance of trust in the brand,” said McQuire. “He’s willing to pull the veil a little bit on how Amazon operates that the general public doesn’t know, for example, how they treat Amazon.com as a customer … That importance of trust, he understands that from the big business he did. ”

– Rachel Metz of CNN Business contributed to this report

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