AWS keeps getting more efficient and competitive. Will its strategy throttle Google Cloud and Microsoft Azure?
In a quarter when Google and Microsoft announced plans to continue scaling up people and infrastructure to support their growing cloud businesses, AWS did something different. While AWS continues to boom (up 49%, marking its third-straight quarter of accelerating growth), the company actually tapered off CapEx and OpEx growth somewhat. Rather than signaling a white flag, however, AWS looks to be driving even greater efficiencies into its cloud business, making it an even more formidable competitor.
Getting more from more
For years Amazon as a whole has run at razor-thin margins, opting for growth over profit. More recently, it has looked to AWS and advertising for profits, churning out more than $2.5 billion in profit during the most recent quarter. Indeed, while Google and Microsoft have yet to turn a cloud profit, AWS is vastly profitable.
And looks to become more so.
As Amazon CFO Brian Olsavsky reported during an earnings call with analysts:
In the first half of the year capital leases were flat year-over-year. Although we're up 20% for the full trailing 12 months, in the last 6 months it's been pretty flat as the team has really worked well to...run our data centers more efficiently, even to meet again increasing usage at our customers; usage rates are exceeding our growth rate.
On the people side, Amazon continues to grow, but by strategically redeploying people into AWS and away from less critical areas of the company, "a lot of our growth areas being fueled by head count that's moving within the company," particularly "a lot of movement of tech head count." This has led to less external hiring, he said, but cautioned it might not represent the long-term trend for the company. More hiring will be required to fuel more growth, but for the moment, AWS is doing more with less (or rather, with more from other parts of the company).
It seems to be working.
SEE: Cloud migration decision tool (Tech Pro Research)
More and faster
For anyone wondering whether AWS still comfortably leads the cloud pack, one key statistic is the number of database migrations to Amazon. In September 2017, AWS announced that enterprises had migrated 35,000 databases to AWS, up from 20,000 in March 2017. By November's AWS re:Invent conference, the company was announcing 45,000 databases had been moved to AWS.
And by July 2018's earnings call, Olsavsky was touting the migration of 80,000 databases. Roughly 5,000 databases get moved to AWS every month, a pace that seems to be accelerating.
AWS, in short, is flying. A 49% growth rate on more than $6 billion in quarterly revenue is shockingly good.
SEE Amazon Web Services: A cheat sheet (TechRepublic)
On the other hand, Google CEO Sundar Pichai is right to argue that the world is going multi-cloud. While some enterprises are undoubtedly going "all in" on AWS, many more will have different workloads running AWS, Google Cloud, or Microsoft Azure, all within the same enterprise. Why? Because the cloud breeds choice, and when adoption is a credit card swipe away, developers will choose the cloud that most suits them. Depending on where they're starting, that likely means AWS and Azure will get the lion's share of workloads, but Google Cloud is making a name for itself in ML-oriented workloads.
And so we have the big three in cloud, and everyone else rendered a rounding error. But among those big three we'll see increased competition. So far that competition isn't denting AWS, but it also seems to be leaving plenty of room for the second and third players to get plenty of revenue for themselves.