AWS isn’t just the Future of the Cloud
I could make a career of writing just about Amazon. I’m impressed how it’s gotten into AI chips recently, that it will open more AmazonGo stores (finally) and that its evolution into healthcare, advertising and banking is more serious than most people can imagine.
However, let’s make no mistake, Amazon isn’t a retail company, it’s a Cloud-first company that’s targeting scalable business verticals. The genius of Microsoft’s reincarnation was Azure and the Cloud, but AWS is leaps and bounds ahead of it.
AWS isn’t just leading the Cloud, it’s Dominating
The AWS reinvent conference in Las Vegas last week gave us a lot of tasty tidbits about the progress of AWS, Amazon’s Cloud unit. Enterprise companies are starting to trust AWS with larger multi-year deals. This means AWS is growing at over 40% YOY. It’s already the cash cow of Amazon, fueling innovation in lower-margin areas.
AWS is also reaching into space with satellite connection service. Meanwhile AWS is about twice the size of Salesforce and is growing faster. Amazon will thus be not just the leader of the Cloud, but the exponential technology early adopter, not exactly the same as innovator. Here we find Amazon is now the top blockchain-as-a-service solution as well in the Cloud.
Analysts like me expect an Amazon Prime Health subscription very soon. This is because their stealth health division 1492 is scaling well. Alexa can even play Apple Music now, which makes Apple’s HomePod as irrelevant as we knew it would be. In 2019 I seriously believe Amazon will start to take significant advertising share away from Google and Facebook. Consumers have a much higher chance of being on Amazon and acting on Ads than they would on Facebook or even Instagram.
AWS’s lead on Microsoft Azure is also bigger than it seems. This is because AWS is signing both more deals and vastly larger deals. AWS beating Azure to JEDI is really just the beginning of a new era of Cloud domination. I think over time the second player will actually be Alibaba and not Microsoft — but these things take some time.
AWS has matured and now it’s more popular across businesses of all sizes with lucrative multiyear contracts and upfront commitments typically preferred by corporate clients. AWS’s depth of features across industries scales well to banking and healthcare now. Healthcare, grocery and E-commerce are just a few spokes of the wheel that Amazon is becoming. But obviously the cloud is foundational.
To understand the growth still occurring at AWS think of this: in its most recent quarter, that amount grew to $17.8 billion, up from $16 billion in the second quarter and $12.4 billion in the first quarter. AWS is more or less the core of what Amazon is and represents. The Wheel of what an American company can become. This transcends the machine learning of Google or the ephemeral Facebook or the greed of Apple; this is a different kind of company. Microsoft has diversified its business model well, but even they look rigid compared to Amazon’s bizarre ability to move into verticals and disrupt stocks.
The Future of bigger deals and deeper features
For AWS it’s a paradigm of innovation, where nothing can be said to be ‘out of reach’. Depending on whose numbers you look at, its market grew at the clip of 50 percent as it continues its unprecedented expansion — not just a growth but a deepening of the features it offers. It’s that depth which makes its competition look like the past — IBM, Oracle, and other names you simply cannot trust in the same vein.
According to CNBC, the bulk of AWS deals for Gartner clients are in the range of $5 million to $15 million, with many deals now exceeding $30 million. This powers the ability of AWS to consolidate and evolve at a faster rate than its competition. As Amazon Video takes on Netflix, Disney, Apple and others in original content, expect Amazon to offer Amazon Prime Health and then later banking into its array of services. It will be the 360 degrees of consumer data while offering radical improvements on such health and financial services, and not just consumer convenience.
To give you a bird’s eye view, in 2017 AWS announced an astonishing 1400 new features. Overall, from the perspective of acquisitions, artificial intelligence and the smart home, Amazon is in a good position. A $25 smart plug can essentially turn any home into a ‘smart home’. Their fleet of hardware gadgets seem neat (if still a bit overpriced). Alexa Skills are already pretty deep as you might know. Now with Apple Music it certainly does seem to be still ahead of Google Home, even though I much prefer Google Home’s voice and essential intelligence.
Now Alibaba and Tencent realize the importance of the Cloud, a bit late but they will catch up. In the meantime as of today Microsoft is the most valuable company in the world, but obviously not for long. Amazon has much more potential — since it’s not just a Cloud company.
The Disruption of New Verticals
Amazon’s bet on Arm could even challenge Intel eventually. There are a lot of plots where Amazon can afford to lose, since sum-total it is winning the race to innovation. The U.S. government has to merge with Amazon as the last company that will be able to take on China’s rising tech dynasty. The Chinese Yuan is destined to supplant the U.S. dollar, it’s just a question of when. The global economy has shifted to the Chinese consumer, and that’s one thing Amazon doesn’t own.
The Cloud still has a lot of room to grow and can accelerate not only artificial intelligence but the next wave of exponential technologies. It enables Amazon to really dig their heels into healthcare and banking of the future. Everyone from CVS to JP Morgan Chase should be worried. Amazon accounts for nearly 50% of all E-commerce sales that occur in the U.S.
As impressive as the likes of Salesforce is, aiming to reach $20 billion by 2022, AWS is basically on pace to surpass $70 billion that year, according to a Nov. 28 report from Jefferies. Microsoft and Salesforce might be the only ones able to keep up, even as Alibaba is expected to take a significant portion of the Asian market.
The business model of Ubiquity
AWS had the luxury of growing up inside a big public company that was already beloved on Wall Street, but just as importantly, it’s AWS that drives a lot of the innovation made possible inside of Amazon. Alexa and Advertising will be growing up in the 2020s, and AWS benefits from the significant consumer opt-in as Amazon is entering the realm of being an artificial intelligence company at its core.
Even in 2019, Cloud adoption is still considered ‘early’. If AWS is the leading horse, it’s not just an early adopter, it’s 2–3 years ahead of everyone else in a lot of things while inspiring confidence in the market in a fundamentally different way. From Ad-tech to Health-tech, there’s something mythical about Amazon’s status in the future of innovation around the year 2020. What Microsoft and Apple couldn’t become, it has and it gives Google a true competitor, not to mention Netflix, Walmart and hundreds of other companies.
AWS has an uncanny ability roll out adjacent products like databases, a content delivery network and a data warehouse service, and to continue upgrading its products so they could be used in highly regulated industries like banking and health care. Low hanging fruit for Amazon is beyond the reach of most other competitors. It’s a bit like what China’s tech companies will be, compared to American ones in the 2030s.
AWS has the scale right now that makes Oracle and Google look small in the Cloud. It’s quite likely they will increase their lead in the Cloud for this reason as tech in the U.S. tends towards duopolies. The U.S. online advertising is a $75–80 billion industry and Amazon there also is trending towards being a more significant player even within the next five years.
The Last Corporation Standing
I really think Amazon’s production of a LOTR-themed original show will catapult Amazon Prime Video into many households as their budget starts to really test Netflix’s business model. In terms of grocery delivery and automating Whole Foods and rolling out AmazonGo-type hybrid stores, it’s not Alibaba good, but it’s definitely a paradigm change for the future of American retail. These things combined only support the evolution of AWS and Amazon’s own bizarre ubiquity of innovation and customer-centricity.
Before 2025, Amazon could even be testing Cisco. AWS said last week that it has developed its own chips for artificial intelligence projects, following Google into the silicon-for-AI market. It’s proven time and time again that once it enters a market, it can out-compete its rivals. Amazon also inspires consumer confidence in a way that Google or Microsoft never have and never will.
Amazon isn’t just the most valuable company in the world. AWS by itself could be worth $350 billion, a market value that today is higher than all but eight U.S. companies, including Amazon. So when you think of AWS, remember Amazon’s incredible momentum as maybe the last great American tech company before the rise of China.