Amazon’s cloud rises to new heights

Amazon’s shares have soared to historic highs due in large part to its cloud, Amazon Web Services. If you ever get the chance to travel back in time, go to May 15, 1997 and tell yourself to buy shares in the company: they have since risen by 25,665.56 percent.

The brand’s global results for the first quarter of 2015 show a loss of $57 million on earnings of $22.7 billion, yet another case of uneven profit generation that doesn’t seem to bother investors, but the $1.6 billion earnings generated by Amazon Web Services (7 percent of its turnover and without doubt its fastest-growing division, with $265 million in profits for the first quarter of this year) have set it on the road to be a $6 billion business by the end of the year, although the company is talking prudently of a five billion dollar business. There is even talk of a possible spin-off, fundamentally to try to avoid conflicts of interest with some of its potential customers.

A year ago there were those who talked about investors losing their patience, along with flat-lining and disappointing cloud results, but today Amazon Web Services is widely seen as the jewel in Jeff Bezos’ crown: a fast-growing business with operating margins of 17 percent, along with a market share of 28 percent compared to Microsoft’s distant second, which has 10 percent, thanks no doubt to good service, but above all because of its generous starter packages. Google Compute Engine, which has been described by some pundits as the one to watch, has just 5 percent of the market.

Heavy investment, low prices, and just three years after it was launched, the feeling of having become market benchmark: Amazon’s cloud activities are now a key part of its business, and one that is particularly valued by analysts. This is a development that began as a way of providing resources to Amazon’s different divisions, but that worked so well and allowed it to gain valuable management experience that it ended up being offered to customers. For companies, the appeal is being able to access limitless resources while paying on an as-you-use basis.

Instead of having to purchase machines, configure them and run the risks associated with new hardware, we can instead use our credit card and pay as easily as turning on the tap, well, almost. Configuring cloud systems is no picnic, and according to many clients, the technical support offered by the company is far from satisfactory, but it works, and itcrashes far less often than most self-managed systems.

This is a business that is growing fast, has great promise, and is without doubt forward looking. The cloud has the potential to become the substrata on which thousands of businesses operate… as well as the foundation that sustains Amazon’s share value.

(En español, aquí)