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 intimidating 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
Coman was Editor of at S&S Media Group. He has a master's degree in cultural studies and has written and edited content for numerous news, tech and culture websites and magazines, as well as several ad agencies.

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