Amazon Sitting on Cloud Nine

Discussion
Aug 04, 2010
George Anderson

By George Anderson

Jeff Bezos and company have plenty of reasons to be cheerful
these days. Among them is the half a billion dollars in revenue Amazon
will generate this year from its cloud computing business, a service that essentially
rents out spare computing power and storage to companies large and small.

According to Brian
Pitz and Brian Fitzgerald at UBS Investment Research, Amazon will see its web
services grow from $500 million this year to $750 million by 2011. By 2014,
they project Amazon will generate revenue in the neighborhood of $2.54 billion.

Although
Amazon’s Web Services are just a tiny percentage of the company’s overall numbers,
the analysts point out its percentage of earnings per share will grow from
10 cents this year to 83 cents by 2014. Importantly, according to an article
on GigaOm, the margins on this business are around 50
percent, more than double Amazon’s normal gross margin percentage.

A Mail & Guardian piece
concludes that the service, first started in 2006, has succeeded for three
key reasons: "technical
flexibility, a highly granular pay-as-you-go billing model and a powerful self-service
interface."

Discussion Questions: Do you see cloud computing growing from a relatively
small business today to a large industry going forward? Do you see other retailers
getting into this business? What do you see as the key benefits of cloud
computing services? What drawbacks could stunt its growth?

Please practice The RetailWire Golden Rule when submitting your comments.

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10 Comments on "Amazon Sitting on Cloud Nine"


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Dick Seesel
Guest
10 years 9 months ago

Amazon continues to be opportunistic in market areas that other companies (notably Microsoft) have failed to exploit. One of Amazon’s early experiments with “cloud computing” ties to the Kindle…once you have read a book, you can “archive” it via cloud computing so it doesn’t take up capacity on your device but you can retrieve it on any PC whenever you feel like it. An ingenious way to expand Kindle’s reach, and just the beginning for Amazon.

The latest release of Office is one of the first times Microsoft has tried to make a dent in this business, as far as I can tell.

Susan Rider
Guest
Susan Rider
10 years 9 months ago

Absolutely, this has a tremendous potential through a company that has good security, is credible and operates professionally with great customer service; all Amazon attributes. The resistance to this form of hosting has subsided and is the wave of the future.

Dan Berthiaume
Guest
Dan Berthiaume
10 years 9 months ago

Cloud computing is on its way to being all-encompassing. Within the not-too-distant future, cloud computing will simply be known as “computing.” Whenever Google issues a mainstream release of its cloud-based Chrome browser, awareness of cloud computing and its many benefits will grow among the general public exponentially. There are a number of valid concerns (security and reliability in particular), but the logical progression of the internet is for it to become the actual structure of computing.

Max Goldberg
Guest
10 years 9 months ago

Provided that there is not a massive security breech, cloud computing is the future. It is convenient, offers constantly updated technology, allows for real-time collaboration and is less expensive. It works for companies large and small.

Joan Treistman
Guest
10 years 9 months ago

If I understand cloud computing well enough I see several advantages. Companies don’t have to reinvent the wheel. There is limited risk to successful implementation. Overhead costs associated with building the software are cut drastically.

Therefore, I can see the growth of this approach. However, some companies will always want their proprietary cloak and that will deter them from riding another’s more cost efficient coat tails.

W. Frank Dell II
Guest
10 years 9 months ago

Cloud computing is the future direction for many firms. Small and medium-sized firms need advanced software to effectively compete. This new thing called the Internet is reliable and again, the key driver of change. Hardware costs continue to decline, but the cost to keep a system up, backed up, and secure continues to increase.

The line between cloud computing and software as a service will continue to blur. Amazon will likely have a business supporting online and catalog retailers. Microsoft, HP, IBM, and Oracle will drive this business model.

Ed Rosenbaum
Guest
10 years 9 months ago

Cloud computing is going to grow to be a larger piece of Amazon.com’s business. Do we think the others in this marketplace will allow Amazon to control it without a fight?

Mark Price
Guest
Mark Price
10 years 9 months ago

As a smaller organization, we are evaluating cloud computing quite heavily. Our needs are not that different from companies of any size, though. They include:
* Faster processing needs
* Increasing RAM and hard drive storage requirements
* Avoiding adding staff to be the DBAs and sysadmins for our data.

Cloud computing consolidates different companies needs and provides a higher level of support than many companies would enjoy paying for internally.

I believe the power of “the cloud” is just beginning to be understood. Think of the Internet in years 1-3–very similar circumstances.

This is a very exciting time to be alive….

Anne Bieler
Guest
Anne Bieler
10 years 9 months ago

I see a very bright future for cloud computing–it will just make life so much easier. Archive things that may be useful in the future, or anything at all–no hassles. It may be too early to think that this transformation will be “easy” but having a trusted partner like Amazon taking the first steps is important for the average folks trying to figure out when and how to use this.

Shilpa Rao
Guest
10 years 9 months ago

Amazon, as a true online retailer, understands the retail aspect of its business very well and strives for excellence enabled through technology. Many times the technological products are an outcome of striving for retail excellence. Kindle and cloud are among them.

For other retailers to start cloud services, it means shifting focus from their core businesses, a heavy infrastructure investment and the herculean task of making it secure. This creates an entry barrier for other retailers to easily get into this business. However, I see many smaller and maybe some larger retailers adopting these services to get a faster ROI with minimal upfront investment. The most important aspect of adopting a cloud service, apart from security, is the exit strategy. What do I do if the cloud service doesn’t meet my growing needs? Will I become so dependent on it that I can never exit? These are the questions that a retailer, or for that matter any business, needs to think about before adopting cloud.

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