Overshadowed by competition

Mighty Amazon’s AWS cloud is struggling

Coman Hamilton

Google and Microsoft have succeeded in slowing down the cloud giant’s revenue growth.

Until recently, it’s been all blue skies for the giant
of cloud computing. In the past few years, the Amazon platform
succeeded in overtaking rival companies with up to 30 years of IT
experience, leaving competitors like Microsoft, Apple and IBM
behind in a cloud of dust.

But now different clouds have begun to appear on the
AWS horizon. In spite of a 23% increase in revenue (beating
competitors like Google and Ebay), Amazon last week reported a $126
million dollar loss, partially due its incessant price cuts to its
cloud services – something that analysts have been forecasting
for a while now.

Meanwhile, the e-retailer is also emerging out of a
major spending spree brought on by its expansions into streaming,
grocery delivery and even its own smartphone.

Stealing the Amazon cloud’s thunder

In March, Google cut the price of its AWS counterpart
services, GCS, by as much as half, forcing Amazon to respond in
kind. Since 2008, AWS has cut its prices more than 40 times, making
it a favourite for frugal webmasters.

Although Google Cloud Services, OpenStack and
Microsoft Azure are still lagging far behind AWS, they have
succeeded in making a dent in AWS’ soaring revenue.

Amazon's "Other" revenue

Amazon’s revenue from the cloud (which is hidden
together with other services in the a category of its public
balance sheets called “other”) last year climbed north of an
one billion
. Bezos believes that Amazon’s retails division
could someday be overtaken by its cloud service, which is its
fastest growing business (and perhaps even the fastest growing
software business
of all time
). However it’s rate of growth has stalled in the
last two quarters.

It’s unlikely that Amazon will be raising its cloud
prices any time soon, given the resilience of other hosters to
lower their prices and that AWS customers can switch to a
competitor without notice.

In addition to Amazon’s dwindling lead, Privacy
concerns following Snowden’s NSA revelations have created an
awareness among clients as to where and how their data is hosted.
It has been speculated that US companies could lose up to
$35 billion in revenue
over the next three years, as a result
of a migration of data to servers outside the US.

Amazon VP Andy Jassy confirmed last November that AWS
was investing in ‘hybrid’ clouds, which are said to combine the
security of on-premise data centres with the scalability of
pay-as-you-go public clouds.

The AWS giant still dwarf its rivals, but price-cutting
competition has just given Amazon a taste of its own business
strategy – and that medicine sure is bitter.

Coman Hamilton
Before becoming Editor of JAXenter.com (S&S Media Group), Coman completed an M.A. in Cultural Studies and wrote for numerous websites and magazines, as well as several ad agencies. // Want to submit a story? Get me at coman[AT]jaxenter.com or linkedin.com/in/comanhamilton
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