Two weeks ago AWS announced its financial results and, for the first time, broke out AWS revenues. The importance of this announcement is that it reveals what has been intuitively obvious to most observers: AWS is a big business and growing fast. None of them, however, evaluated what AWSa€™s numbers mean in terms of the IT industry and overall application of information technology in our society and economy -- and I think thata€™s where the real meaning of AWSa€™s revenues emerges. I went on and extrapolated growth projections from Pacific Crest (it said AWS was growing at around 40 percent) and estimated that AWS would see $6 billion in 2014 and around $9 billion in 2015; obviously I was wrong on the high side. However, while I was on the high side, ita€™s important to recognize that the numbers I estimated arena€™t wrong -- just a few years early. In the figure below I updated the revenue chart from my previous piece to include a third projection based on Amazona€™s announced revenue and numbers and its statement that the service is growing at 49 percent. As one can see, this third line shows AWS revenues at around $46 billion in 2020, 15 percent higher than my previous estimate, and evidence of what the impact of a high growth rate can be.
The curious thing about these margins is that theya€™re so un-Amazon like -- they put paid to the oft-voiced incumbent vendor lament that AWS prices can be so low because Amazon is a€?subsidizeda€™ by the capital markets, while they have to show profit.
As this Seattle PI piece describes, Amazona€™s core business strategy is low prices, expressed via cost efficiency and low margins.
TweetTo meet the needs of companies for intensive treatment of very large volumes of data, Amazon Web Services announced new instances called D2 based on the Elastic Compute Cloud infrastructure (EC2) and intending to process very large volumes of data through additional computing power. Amazon Web Services continues to gain strength in the public cloud market, leaving its rivals IBM, Microsoft and Google in its wake. Given the competition that is going on under the big cloud providers, it will be interesting to see if competitors Google and Microsoft will soon come up with new virtual servers for big data analysis. Although Amazon eclipses competition, the race is on and Microsoft is posed now increasingly clear number one challenger to Amazon Web Services. The good news for these companies and the long list of operators that carry out small infrastructure services operations in the cloud is that IaaS and PaaS will progress well in the future and offer strong growth opportunities for end users.
In 2012, more than 1.7 million jobs in the field of cloud computing remained unoccupied, according to analysts firm IDC.

Cloud marketing has the ability to drastically change the ways in which they reach and engage their audience, particularly with regard to distributing and storing mission-critical data. More and more companies encourage their employees to work on their devices, thus reducing the cost of computer equipment, but also increase the cost to maintain licenses and safety. Despite the inclination to wait until all of the cloud’s kinks have been worked out, holding off on cloud initiatives until the industry matures won’t guarantee success. The software industry is undergoing major changes by trends such as cloud, SaaS, mobile technology and the “consumerization of IT”.
Google has acquired Orbitera, a startup that's supposed to make it easier for software vendors to sell cloud-based products to businesses. This website uses cookies, also third parties cookies, in order to send to you adverts and services in line with your preferences. Amazon has typically remained quiet on the subject of AWS financials, but has finally opened up about how the service is doing.
For the first time, the notoriously secretive Amazon has opened up about AWS financials and given everyone a look at how the service is doing. In that piece I gathered estimates from a number of sources, including the much-lamented GigaOM and various investment banks; the consensus of those estimates was that 2014 would see around $5 billion and around $7 billion in 2015 (pretty close to AWSa€™s actual results).
In that piece I noted that, by using the Pacific Crest growth numbers, AWS would, by 2020, achieve around double the consensus revenue numbers ($40 billion vs. And, given that AWS is growing approximately 25 percent faster than Pacific Crest estimated, it might be that my 2020 numbers will actually end up too low, not too high. In this third set I have used 49 percent throughout the next five years even though Amazon said AWSa€™s growth is actually accelerating. Ita€™s surprising that in all of the commentary on the AWS revenue announcement, no one focused on the likely future numbers for the service, which, if the growth rate continues, become truly staggering pretty quickly. One insightful commentator, Charles Fitzgerald, says that Amazon needs to spin AWS off so that the service can be free of the companya€™s seemingly unending new offerings (e.g, Echo, Amazon Business, Dash, which I wrote about here) that compete with it for capital, and can therefore grow even more rapidly. These leases reflect Amazon using every dollar it can access to invest in its business, which is what companies that view themselves as participating in a transformational shift offering unprecedented opportunity do.

That is in addition to the Xen block ring protocol for better throughput and scalability of storage. According to the latest RightScale 2015 State of the Cloud Report, the AWS penetration rate still rose by three points in twelve months, from 54% in 2014 to 57% in 2015. Perhaps more surprising is that AWS is not a low-margin business -- it achieves around 17 percent operating margins, much higher than the overall Amazon business itself. Of course there were a great number of articles (some linked to in this piece) discussing the revenue announcement implications.
In other words, low margins are baked into the Amazon strategy (the one time Amazon strayed from this, with the Amazon Fire phone, it was unsuccessful and derided; I maintain that if Amazon had followed its core strategy and priced the phone at $99 initially, it would have achieved very different results). Amazon is working flat-out just to keep up with current demand; increasing demand by dropping prices (and reducing margins) would be self-defeating, and pose a real business risk -- lack of capacity, which could alienate current or potential users. This is in part based on a topic that briefly became hot during the past quarter, Amazona€™s use of capital leases, which appeared to negate the companya€™s ability to drive free cash flow in the face of negative profitability.
In the past year, the penetration rate of the Azure cloud platform on the segment of infrastructure services (IaaS) has doubled from 6% to 12%. Most of them were in the vein of a horse race -- how far in the lead is AWS, how fast are the other horses, will AWS flag in the stretch run, etc. The next section of this piece will address the demand side, but one can look to AWSa€™s margins for a clue to the supply side. A web hosting provider shares your site on servers in a data center with faster connections. Google’s infrastructure has only 5% of preferences, but the platform is attracting greater interest among new adopters. Read More >Recent Posts Tips On Placing Ads On Your Website 12 Aug 2016 The Don’ts Of Web Designing 10 Aug 2016 Which Image Format Is The Perfect One For You?

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