No, but sometimes it surely seems that way.
Just as Amazon has transformed the retail world, its Amazon Web Services unit is transforming the world of data centers and IT management.
This public-cloud service provider is upturning the authority of CIOs and creating huge new price pressures on traditional enterprise-IT suppliers. I believe it’s even creating the possibility for a world without central IT organizations. Who will need the huge cost and complexity of a central IT group when you can just put all your computing and storage in the public cloud?
We aren’t there yet, but AWS is huge. It currently controls 40 percent of the global market for public Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), according to Synergy Research Group, and no one else comes even close. AWS’s three closest competitors in this space — Google, Microsoft and IBM — have a market share of just 23 percent combined, Synergy says. All this in a market that Synergy estimates is worth $7 billion a quarter, and growing by nearly 50 percent a year.
“AWS continues to impress as a dominant market leader that has no intention of letting its crown slip,” says Synergy research director John Dinsdale.
What makes AWS so dominant? Dinsdale points to 5 success factors: huge ongoing investments in infrastructure; continued expansion in its range of cloud services; strong credibility with customers at large enterprises; consistently strong execution; and the “wholehearted” and long-term backing of Amazon senior management.
“AWS is checking all of those boxes,” Dinsdale adds. “Any serious challengers need to do likewise.”
And AWS’s box-checking translates into some highly impressive figures:
> Over the last 3 years, AWS’s sales have nearly tripled, from $4.6 billion in 2013 to $12.2 billion last year, according to Amazon’s 2016 annual report, released yesterday.
> AWS now represents 9 percent of Amazon’s total annual sales.
> Operating income at AWS has grown more than six-fold in the last three years, from $458 million in 2013 to $3.1 billion last year, according to Amazon.
> To hold all its IT infrastructure equipment, AWS owns or leases more than 8.1 million square feet of data-center space.
> Andrew Jassy, CEO of AWS, last year earned total compensation of $175,000 in salary plus $35.4 million in stock, according to Amazon’s 2017 proxy statement. That made him Amazon’s highest-paid executive in 2016. Don’t feel too sorry for company founder and CEO Jeff Bezos, though. Despite earning less than Jassy last year, as Bloomberg reports, Bezos is the second-richest person in the world with a net worth of $77.7 billion.
AI On Board
Amazon execs are clearly smart. Now they’re getting even smarter with Artificial Intelligence. CEO Bezos, in a letter to shareholders published yesterday, said Amazon already makes extensive use of machine learning and AI, and plans to use a whole lot more.
In his letter, Bezos said machine learning is already used by Amazon for its autonomous Prime Air delivery drones; Amazon Go brick-and-mortar stores checkout; and Alexa, the cloud-based AI assistant.
Machine learning at Amazon also powers a lot of less-visible systems, Bezos added. These includes algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection and translations.
Back in 1997, when Bezos issued his first shareholders' letter, he wrote, “It’s all about the long term.” Amazingly, that still seems to be true. We can all take a few lessons from Amazon as it transforms the IT world.