Amazon Web Services (AWS) leading IaaS providers


It’s absolutely no surprise that Amazon Web Services (a.k.a. AWS) is the leading vendor of Infrastructure-as-a-Service (IaaS) for cloud computing.  As seen in the chart below Gartner, a well recognized market analysis company, does extensive research on particular industries and published what they call Magic Quadrant results for these industries researched.  Gartner carefully evaluates each companies “ability to execute” as well as “completeness of vision” for these companies.  Then in order to provide a nice visualization of this research they create four quadrants and position each company into one of four different classifications which are ‘niche players’, ‘visionaries’, ‘challengers’ or ‘leaders’.  As you can see from the Magic Quadrant graphic below published by Gartner in October 2012 on Infrastructure-as-a-Service (IaaS), Amazon Web Services is a clear ‘leader’ with a high ‘ability to execute’ as well as ‘completeness of vision’.

Gartner-Magic-Quadrant-Cloud-Infrastructure-Providers_IaaS_October_2012

So, how is it that AWS gets to enjoy such a leading position in the IaaS market place?  Well, it’s certainly no accident and it starts with innovative and visionary people, not technology. And Jeff Bezos, Amazon’s found and CEO, is one such person that has built Amazon, and AWS, into a great success through his personal passion and vision.  Of course he’s smart enough to surround himself with extremely talented people and he certainly did not achieve such success alone but his leadership for the Company is what resonates with customers, employees and investors.

Below is a graphic I created, from my personal opinion only, on the evolution of Amazon and their transition from strictly an e-commerce company into an IaaS/Web Services company. These are not easy milestones to achieve but as you can see there has been evolution of their various businesses without ever losing focus of their core competencies such as e-commerce.

 

Now I would like to ask you to stop reading this post and take a close look at the graphic above.  Where do you think Amazon is currently on the technology-curve?  I would absolutely say they are at the “Monetize AWS” stage.  (Note:  I should mention that the graphic does not imply that AWS or Mobile is at the “Mainstream Markets” stage, yet rather the point of the graphic is the illustrate Amazon’s ability to transition their business over time since the Company was founded in 2005).

In fact I’ve heard that AWS revenue is about $2 billion per year.  While that is a tremendous amount of revenue it pales in comparison to Amazon’s overall revenue of $66+ billion.  If e-commerce is in the tens-of-billions worth of revenue and AWS is only two-ish why in the world why would Amazon continue to heavily invest in the AWS business?  Simple, profit margin.

Imagine the incredible costs associated with managing this e-commerce empire.  Inventory, warehouses, workers, shipping costs and so on and so on….  E-commerce is a low-margin, high-volume business and Amazon does it well but it’s easily replicated through incredible efficiency if you have massive resources to work with.  When do you think that Wal-Mart will finally figure this out and become a competitor?

 

Why AWS wins?

In summary let’s summarize why AWS is winning by such a wide margin.

  1. Consumers love the Amazon experience
    • While there certainly are cases when Amazon has failed, I think a vast majority of consumers enjoy doing business with the company
    • This is true of E-Commerce, Affiliates or AWS (I have personally worked with them in each capacity and always found them great)
  2. Customers trust Amazon because of pleasant experience
    • Trust is the intangible that is only earned through a quality reputation.  Again. Amazon has a terrific reputation.
    • Therefore, if customers trust Amazon with their personal credit card, shipping address and other sensitive information why wouldn’t they also trust them with their business data by using AWS?  It’s a natural extension of trust.
  3. Quality of service
    • When Amazon enters a market segment they do it to win and not just be an average player in a particular market
      • For example, when they went into the Affiliate business, they did it the best and it’s the most successful Affiliate program ever!  They offered their Affiliates all sorts of tools, methods for integration, advice, tips/tricks and everything else to make the Affiliate successful.
    • Having developed such a successful Affiliate business led Amazon to get into the hosting and infrastructue business.  They realized that they did it so well for their own internal purposes that they can offer a service to other companies which desired to host their applications with a service provider.
  4. Humble
    • Even though AWS is a $2+ billion business, Amazon is extremely humble in that they are “Infrastructure” (IaaS), and not Platform-as-a-Service (PaaS).  They recognize that they do not want to do any business in a mediocre fashion.
    • Amazon’s humble corporate culture seems to be a direct result of Mr. Bezos.  Every interview I’ve seen with him is that he is sincere, honest, and above all else, humble.
    • They do not brag about the fact that many other successful Software-as-a-Service (SaaS) providers such as Netflix run their business on Amazon AWS.  Amazon has chosen to be the silent partner to deliver quality service in place of flashy headlines.

 

 

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