5 billion dollars a year. That is pretty impressive.
Compared that to a company like Google that can't make any money at all off their infrastructure except with search ads[1] :-) That is the real story for me. And a tiny bit personal because when I was there I didn't feel that platforms got nearly the respect they deserved for keeping the roads rolling.
Congratulations to the Amazon team, that is an impressive feat indeed.
Consider that their revenue is about the same as what Salesforce (CRM) will likely report (based on analyst estimates). This is pretty impressive:
- Q1 2015 revenue: $1.57B (AWS) vs ~$1.5B (CRM)
- Q1 2014 revenue: $1.05B vs $1.23B
- Q1 YoY change: 49% vs ~22%
- Q1 2015 operating income: 16.9% vs (~3%)
- Q1 2014 operating income: 23.3% vs (4.5%)
Basically for all the talk that Amazon is a low-margin, commodity business that will never make money, their AWS business at least is doing really well.
I'm not taking anything away from Salesforce, it just happens to be a similarly sized comparison that most people thinks is a pretty good business. When compared, AWS looks pretty great!
in the style of Drake equation: $1.5B/quarter, supposedly 1/3 of it is billed CPU time, at $1/hour per one 1U computer, at 500 hours billed per quarter per computer we have 1M computers - at 40 boxes per rack we have 25K racks, at 50 racks/row it would be 500 rows, at 50 rows per "warehouse" it will be 10 "warehouses". The storage money and racks i'd suppose is comparable to CPU boxes in numbers. So in result it would be 10 "warehouses" of 50 rows of 100 racks.
I like your approach, and have some thoughts relevant. What's a computer? The $1/hour revenue is generated by AWS from FAR less than 1U. SuperMicro sells a 2U machine with 4 full sized computers in it with 6 drives. You can put 12 cores in that, and an AWS 'ECU' core is a hyperthreaded core. So, in the Supermicro "quadnode" [1] version you get 4 * 12 * 2 = 96 cores in 2U, or 48 cores per U. An AWS computer/instance that costs $1/hour is a "m2.4xlarge" [2] which has 8 cores. So you can sell 6 "Computers" per U with this math.
> SuperMicro sells a 2U machine with 4 full sized computers in it with 6 drives. You can put 12 cores in that
i don't think AMZN or Google put 4 sockets per 1 U. While obviously it is possible, it would be pretty dense for normally powered chips. My understanding is that 2 socket/1U is more typical. At 100W/chip it would be a difference between 8KW and 16KW heat from a rack. But anyway, you're right - AMZN probably gets more than $1/1U. Their cluster 2-socket (16 real, 32 v-cores) instances go for $3.5/hour. Starting from that number we can adjust it down somewhat for pre-paid/reserved/spot pricing. Anyway, lets hope fuzziness in one number is compensated (not amplified :) by fuzziness in another ... Actually from the 2013 link you posted in the response below (that one - https://storageservers.wordpress.com/2013/07/17/facts-and-st...):
"Amazon data center- Amazon has around 450,000 servers in its data centers sited in 7 locations in the world. "
So adjusting for 1+ years of growth (of at least 10-20% as they had 49% revenue increase) my original estimate was less than 2 times wrong :)
Edit: actually adding storage servers - may be up to 4 times wrong if they have all 1U servers, so the most probable parameter to adjust would be $/1U to something like $2+/1U.
With the photos released by Google/MSFT/FB and OpenCompute specs they are putting ~60-96 "1U equivalent" boxes per rack (each with 2x E5-2600 class CPUs). Getting datacenter densities to 25kW/rack requires a bit of extra work (Chimneys, containment, etc) but the big guys do this already.
It's totally possible to get to 80 general purpose compute servers to a rack, with a power draw of around 15kW. I prefer the Supermicro FatTwin, but there are other options with similar density.
It usually isn't worth going to a mega dense rack (25kW or whatever), because unless you built the entire site with this in mind, you'll probably run out of power before you run out of space. Then you spent extra on these extreme density solutions for no real return. It can still make sense, if the entire solution is thought out.
Please don't mistake my engagement for dismay. I enjoy your analysis.
>> SuperMicro sells a 2U machine with 4 full sized computers in it with 6 drives.
>You can put 12 cores in that
In fact, the quad node contains 4 motherboards. Each motherboard supports 2 processors. So that's 8 processors in 2U, or 4 processors per U.
Each E5-2600 processor could support 8 'real' cores, or 16 Amazon Virtual cores. 4 * 16 = 64 Amazon cores in 1RU.
I agree that our math won't be right, and I think you're in the ballpark. But, the densities can be 'hella' higher than one things with modern gear. It's only 70W for the 8 core processor at 1.8ghz, 135W for the 2.9Ghz version, so if we do 4 processors per rack unit, that's "only" 540W per rack unit. 60 Rack units is 32KW/RU - which is a lot but not impossible. I'm gently simplifying by assuming 0 watts for the rest of the chassis, which is approximately reasonable if you're building a CPU farm.
Jesus, I'm occasionally amazed at GAAP for not requiring breakout of a business unit as large as $6 billion (last quarter obviously somewhat less) simply because the overall company is comparatively large; especially so when the profitability of the unit is so different from the overall company. Seems fucking material to me.
I believe that's why Amazon went ahead with it. If you don't run into SEC requirements, you run into aggressive shareholders that will cause you legal problems trying to force you to reveal the value of such an enterprise. Suddenly Carl Icahn is breathing down your neck trying to get you to reveal that info, so they can judge if it should be spun off. The shareholder risk becomes immense the larger a business like that gets without breaking out any financial information on it.
I think you're correct, it probably just hit 5%. I'm just honestly amazed given the lack of transparency and risk in super gigantic corporations that there isn't an absolute dollar threshold for lines of business as well as a percentage one.
It would be hard to mandate as how would you define a business unit? If amazon just sold books would fiction and non fiction count as different units or do book sales and electrical? There a different ways you can slice a business.
It's actually not difficult at all; there are already materiality rules (in the case of revenue disclosures, they're stated in percentages), and it's fraud to break them. You could just define material by both absolute dollars and also percentages.
"Since its inception, Amazon has refined and expanded AWS while competitors including Microsoft and Google have tried to replicate its success with similar projects. Those companies have only recently started to deliver basic services on par with Amazon’s."
Is this really true? I know that AWS offers many more services than competitors currently, but for the services for which there is a competing product, is the AWS offering really that much better?
In my opinion, Google is ahead of AWS in most aspects besides access control. GCE instances vs. EC2: faster boot times, better network, a far better pricing model for startups (no upfront cost and year-long lock-in to possibly outdated instance types).
Yes, Amazon offers a bigger variety of products, but the newer ones just scream vendor lock-in without much-added benefit. Why would I use Opsworks if Chef or Ansible work just as well?
Choose anything, except maybe object storage, and there is somebody out there who does it better than Amazon, there is also sombody who does it cheaper than Amazon.
Except for S3, AWS isn't the best at anything, nor the cheapest, but, they are the only ones doing it all, and typically the ones inovating new services. Nobody has all the services AWS has, or even as well integrated, or as granular etc...
If you have very specific needs, then go pick and choose from different vendors (assuming you're ok with multi-site latency), but if you're starting a company and have generic needs that aren't well defined yet, AWS is probably your best bet to start with. People do that, and once their invested so much time in learning the environement, they stick to it.
I will agree that Google mostly has higher quality infrastructure, but faster boot times and lower latency networking aren't what most cloud consumers care about.
AWS has been diligently moving up the stack, creating higher level services that are "good enough" for many of their customers, who are increasingly enterprises teams who want to outsource as much as possible to Amazon. They can go all-in with AWS and expect a constant stream of new features and services at relatively competitive prices.
With Google, their cloud platform still feels non-core to their business and they have a history of retiring services when their priorities change. I hope Google and Microsoft become fully viable alternatives, but for now, enterprises seem more comfortable betting on AWS.
What's the basis of your argument that Google Cloud is better?
My personal experience has been exactly the opposite - AWS is light years ahead of Google Cloud. Does Google Cloud provide Machine Learning service?
For the longest time, it was only supporting Java and Python SDKs. And the Google's API is still very much lacking in terms of features and stacks. In fact the better support and much comprehensive services presents more choices rather than "vender lock-in". Keep in mind, all the auxiliary services are simply the open source technologies builds on top of AWS EC2 - if you like to spend time and money, you can totally build your own!
And this is common, as we've just seen people complain about Google Cloud 4 days ago.
> Does Google Cloud provide Machine Learning service?
Yes they do. [0]
> And this is common, as we've just seen people complain about Google Cloud 4 days ago.
To me, this is an isolated incident. On the other hand, seemingly every AWS customer of non-trivial size had to reboot a significant part of their machines in the last year because of Xen vulnerabilities (with no way to predict if you will land on a patched machine).
Ah, great. Apparently I didn't know they do. But again, being first doesn't automatically mean it's better. For instance, Sun's grid computing concept was earlier.
I never said that they were any good, you just asked if it exists.
I personally don't know why one would use any of the GCE/AWS/Azure ML offerings apart for really small use cases (in which case you probably don't have enough data). Most businesses with an ML component (like my startup) need millions of predictions per day which would be crazy expensive on any of those platforms.
> For the longest time, it was only supporting Java and Python SDKs.
You are describing Google App Engine circa 2010. I recommend taking another critical look at what Google has available because it's quite competitive these days :)
Lambda looks awesome... I'm tethered to Azure, so the closest I get is Azure App Service which works, but not as elegantly... Dokku-alt is working pretty well (testing now) as a deployment system... was looking kubernetes and the like, but it's overkill for my needs.
Doesn't Amazon's mysql api fronted db work similar to google's?
Assuming you're both talking about Google Cloud SQL and AWS RDS, then with RDS you can actually choose between MySQL, PostgreSQL, SQL Server, Oracle, or Amazon Aurora which is supposed to be compatible with MySQL 5.6. Google Cloud SQL only seems to mention MySQL.
For scalability, RDS gives you up to 3TB storage (1TB for SQL Server, 64TB for Aurora) and DB instances with up to 244GB RAM, 32 vCPUs and 10Gigabit network, whereas it looks like Google Cloud SQL is 100GB and 16GB of RAM. It looks like Cloud SQL provides managed replication/failover as standard; with AWS this is optional, but simple to set up. (I use RDS; never tried Google Cloud SQL.)
(I have no connection with either company, beyond being a customer.)
Amazon RDS for Aurora is what I was thinking of as being similar to Google's Cloud SQL... they're both mySQL API layers over the top of their BigTable/distributed backends.
I was actually thinking of Amazon RDS for Aurora[1], which seems to be a mySQL api layer over Amazon's BigTable backend. and similar to Google Cloud SQL.
Nobody seriously uses AWS ML service, do they? This is the worst idea ever unless it's just to see how well it works, because you have very little control over the algorithms/model parameters.
Compared to Azure, yes. The IaaS offering on Azure has many, many limitations. It is also very difficult to use. There is no general pool of servers. You have to cram VMs into these groupings called "Cloud Services" which are limited to 50 VMs each. No support for TLS termination on their load balancers. SSDs are currently a "preview" feature and only work on a subset of hardware types.
In all fairness AWS had a 4-5 year head start on Azure. Also there are a lot of really exciting things coming down the line for Azure. I don't expect this gap to last long.
SSDs, okay. That's something that's legitimately difficult to scale, particularly if you've invested heavily on spinning disks and made assumptions about their performance/reliability. I get that.
But no TLS termination? At a company that has invested $15bn on their cloud products and has in-house expertise on the actual source code of one of the most widely-used networking stacks? That's... surprising, to say the least.
What does the lack of SSL termination mean? We are running many services in Azure which we access using TLS1.2 via the loaf balancer so what would SSL termination add to this?
> An SSL termination proxy is a proxy server that is used by an institution to handle incoming SSL connections, decrypting the SSL and passing on the unencrypted request to the institution's other servers (it is assumed that the institution's own network is secure so the user's session data does not need to be encrypted on that part of the link). SSL termination proxies are used to reduce the load on the main servers by offloading the cryptographic processing to another machine, and to support servers that do not support SSL, like Varnish.
SSL/TLS can only be configured if you use their "Web app" PaaS offering . If you're using plain VMs (IaaS) then there are no options for SSL/TLS. You have to do it yourself on your VMs using haproxy/nginx/stud.
I beg to disagree. As I wrote in another thread, Microsoft has not one but two Platform-as-a-Service offerings:
- Azure Cloud Services (PaaS)
- Azure Websites (PaaS light)
Unfortunately, when I last looked at it four months ago, both of them were quite unattractive, at least for Python hosting.
First of all, they have no support for automatically installing python dependencies, i.e. no support for pip. If you want to install e.g. django-rest-framework, you have to install it locally and then manually copy the installed files to Azure (with FTP, if I remember correctly).
Secondly, they both run Python on a Windows Server running behind the IIS web server. Besides the fact that you will walk along the road less travelled (Django is overwhelmingly deployed on Linux), there is a very concrete limitation: if you want to install binary packages (e.g. PIL or Pillow), you have to manually compile them for Windows (and of course copy them manually to your Azure server). Yuck.
If you want to use Azure, go with their IaaS offering (Azure Virtual Machines) and stay away from their PaaS offerings
Yes, the Cloud Services grouping around IaaS VMs wasn't a good idea and is awkward. You can blame me for that. :) Stay tuned next week. We may have some solace for you.
Azure is definitely behind in some regards particularly IaaS. That was not really their strategy for quite a while and it shows. We are using their PaaS now and really like it, much better experience than we had with stuff like elastic beanstalk or cloudformation on AWS.
We still used Amazon Email and CloudSearch though. Azure has no email and Azure search is too new for me to trust.
If you're controlling your azure account through the powershell interface, it's a little better... a lot of things require the beta UI, which isn't so great.
That said, I was able to setup a quick little proof of concept web/worker app with node pretty quickly... though you should be aware it is running in a windows host (either 32 or 64bit configurable)... you can include exe/dll's in your package as needed too... I used a git endpoint for deploy, and that worked pretty well. There's apparently a build environment suitable and configured for node_gyp to be able to use.
Though imho it's not as flushed out as App Engine, or bits of AWS... I am able to run dokku on a few hosts... Work's account finally came online for the SSD preview about a month ago... it's definitely worth it.
There's some mishmash of availability... I kind of like that using blob storage, tables and azure queues is as simple as having a storage account... though the node client is a little lacking in documentation and examples.
We only run Linux and use Macs. So powershell isn't an option for us. The SDKs for various languages aren't terribly mature either. I don't think any of them except the .NET one are 1.0 yet.
Don't get me started on the Beta UI vs normal UI. Some things are only supported in one and not the other and vice versa. I'm constantly being flipped back and forth between the two. Also they are both really unpleasant to use. I get lost a lot.
It's actually kind of sad that they had a strong initial push to support other languages and platforms, only to let those SDK/API clients wither on the vine so to speak... The github issues on their public repos seem to be mostly unmaintained (several a month or older without an MS representative).
On the flip side, there were some issues with connecting to Azure via the node `mssql/tedious` module, which isn't from MS, and a few developers from MS Azure SQL teams stepped up to track down the issue. Learned a bit more about the TDS protocol than I really wanted to that month.
It seems to me that MS Azure's development department should either implement a 20-40% time for developers to work on the public stuff and/or documentation as developers desire, or have cowboy teams that do. MS isn't likely to spur more open development efforts as most corporate based projects don't inspire much community involvement.
That said, given the choice I might be more inclined to use Joyent, DigitalOcean or Linode for my own stuff... The choice wasn't mine at work, the existing solutions are mostly .Net (some Node) based and Azure was the most pragmatic choice of migration to a hosted solution when that was done almost two years ago. And running anything under Ubuntu VMs with docker on Azure is pretty trivial... Once the next generation infrastracture is in place (a couple months away), it will become easy enough to run anywhere.
>"Since its inception, Amazon has refined and expanded AWS while competitors including Microsoft and Google have tried to replicate its success with similar projects. Those companies have only recently started to deliver basic services on par with Amazon’s."
They could have summed up the whole thing as First-mover advantage. Amazon created this new market and when MS, Google etc saw a real opportunity in it, they wanted a piece of it and thus moved in by replicating the best features. Meanwhile for Amazon it was all about maintaining its majority share refining and expanding.
Depends on your needs, tbh, traditional hosting is a better fit for mine. I can automate buying and provisioning bare metal servers already. I don't need AWS for that.
I spoke with a Google channel lead who said Google's cloud is 5x the size of Amazon's. The policy is not to talk about it publicly because Google itself uses its own cloud tremendously and the 5x size was not something customers necessarily utilize.
He may be comparing Google's total data center capacity (search, cloud, etc.) to AWS. I do monthly scraping to track cloud marketshare for Alexa 10k and Fortune 500. From that analysis, EC2 is at 12-14% marketshare compared to < 1% for GCE and 1-2% for Azure's VM service. http://blog.cloudharmony.com/2015/03/compute-marketshare-ale...
Most analysts seem to think that AWS is way bigger than Google's public cloud. That channel lead may well be right in terms of total number of servers or MW of datacenter capacity.
BUT scale is not the only thing that the cloud brings. AWS is not just S3 and EC2. I think it's pretty clear that Amazon is much further along the road of productizing their cloud. i.e. providing all the products that businesses and most notably enterprises need to move to the cloud. It will take a while for Google (and Microsoft) to catch up in this area.
Published information I have dug up shows Google's cloud is larger, but only by 50% and the dates were in the 2012-2013 range. Regardless of whether the channel lead's motivations are to say one thing or another, he did say something that struck me with conviction: "We're not going anywhere. We're NOT relinquishing this market."
My experience with Kubernetes and Managed VMs and as an App Engine dev since 2009 compared to Amazon's latest offerings such as Glacier and RedShift shows Amazon is distinctly targeting the present with these legacy plays. Google is targeting the future.
Not much talked about: Google's profitability gives it a distinct advantage in its ability to wage a price war compared to Amazon should have anyone on Amazon's platform concerned.
I wouldn't so much phrase it as "Amazon is targeting the present"; they're executing a hybrid strategy of making future-stuff to entice you (Lambda, or DynamoDB way back when) and then also cutting away all the objections you (some enterprise CTO) could have to moving 100% to their cloud stack, by making it also capable of doing everything your current private LAN/VPS/colo stack already does—even if everything your current stack already does is brain-damaged legacy stuff.
In other words, Google is building a cloud that you can only really pick up for blue-ocean ventures. AWS gives you a bunch of the same tech, but also a clear transition path: you can first duplicate all your present-day infrastructure in their cloud with little-to-no service interruption, and then start replacing it, component-wise, with the future-tech.
I think derefr replied to your first two paragraphs nicely.
"We're not going anywhere. We're NOT relinquishing this market."
I think for a while some didn't believe how serious Google was about the whole selling cloud services thing. Now they do.
Regarding Google and Amazon's disparate profitability:
1) Cash is arguably more important than profitability from an investment financing perspective. Amazon and Google are in the same ball park regarding free cash flow (>1B, <10B) and while Google has an enormous cash pile Amazon certainly has the ability to spend several tens of billions investing in their clouds in the next few years, as does Google.
2) Secondly, for the sake of their stock price, Google would be very hesitant to have their high margin search/ads business become dominated by a low-margin commodity cloud business. Their scope to use all of the free cash generated from search/ads for their cloud business is limited. Stock analysts don't like declining profitability whereas Amazon already has basically zero profits and is basically priced at a Price/Sales ratio like a large retailer.
Amazon makes extensive use of capital leases support their expansion. In 2014 they were roughly on par with their other capex (in the $4B-5B range, don't remember exact number), except that their capital leases don't deduct from Amazon's free cash flow. If you subtract those out, the FCF situation ends up looking quite a bit worse.
They're sort of taking on a bunch of debt (or things that look like debt) and downplaying it with clever accounting. In the current market environment I don't know that it's really a problem (they just borrowed $6B via a bond issue, for example). Just an interesting reality for a company competing with two cash-rich rivals in a hugely capital-intensive space.
Care to elaborate? It seems like you know the answer to my question =]
For example, how is EC2 much better than GCE, if it is. (I realize you didn't imply that it was; this comparison just seems the most interesting to me)
"These have since become common building blocks of Internet-based computing systems, supporting companies ranging from large enterprises like Infor US Inc. and Netflix Inc. to startups such as Instacart Inc."
When I see a brand name mentioned randomly in an arricle, I wonder who paid for it. Why would Bloomberg mention instacart specifically? Is it common practice for companies to pay for these subtle pseudo-mentions in articles?
Not paid directly - it's a combination of 1) brands being top of mind 2) what people / robots will recognize and ever so likely potentially to share or what will have the tiniest bit of extra SEO juice.
#1 only comes from a lot of ongoing PR outreach, coffee chats, briefings, etc - which takes time and $$$$ usually via an agency working nonstop on developing relationships to keep a brand top of mind for side mentions like this and to be at the top of the rolodex when a reporter needs a quote or some help understanding an industry or technology space.
It's also entirely possible that the reporter either asked AWS for some customer names and cherry-picked those, or the reporter asked their network for some names. In my experience, it's not paid other than in really shady non-mainstream media sites.
It's an interesting question because many more well know startups use AWS (Airbnb, Pinterest, Etsy, Spotify). Amazon has a webpage specifically to highlight them: http://aws.amazon.com/start-ups/. It's hard to imagine that Instacart would be the startup that would be offered as an example by Amazon or the reporter's network. It wouldn't surprise me if reporter was friends with the founders.
Oh yes. Behaving well with a lot of performance variation and continuing to run in a partial failure state is a reality. Cloud makes it an explicit. Your own bare metal makes it implicit. If your app was born in the cloud, it will run that much better when it gets its own home. Until a local catastrophe, of course.
16% contributory profit is not a slim margin. AWS made a quarter-billion profit on 1.67 gross revenue. That's better than 80% of the industries, beating brokerages, beverages, and pharmaceuticals, according to this NYU study here: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/...
The barriers for entry to Cloud are actually higher than for airlines IMO. In the long run it will become more like the utility industry (think electricity) than airlines.
To get into the same cloud market as AMZN/MSFT/GOOG you are going to need:
1. Several billion dollars of Capex to get to the same scale as the incumbents.
2. A large amount of investment to replicate all the internal software that Amazon and friends have.
3. Goodwill from startups and/or enterprise CIO types.
Getting into the airline business is comparatively easy:
1. You lease the planes from Boeing or Airbus.
2. Pilots and other staff are highly skilled but otherwise fungible.
3. Marketing through traditional consumer channels and price comparison engines is very well understood and if you're willing to eat the losses then growing share is doable.
Getting into the cloud, and getting into the cloud on the same level as Amazon, Microsoft, or Google are two different things.
Just like getting into the airline business, and getting into the airline business to compete with the likes of American Airlines, Lufthansa or United Airlines are two different things.
The same overly simplistic business plan could just as easily be applied to 'getting into Cloud', and while leasing a few business jets off Boeing has it's own page on boeing.com[1], it's still a significant expenditure.
Here's the same plan:
1. Lease a pile of servers from Dell or HP
2. Developers, Sysadmins, and other staff are highly skilled but otherwise fungible. OpenStack is rapidly maturing so you can take advantage of that.
3. Marketing, marketing, marketing. Through newer online social media channels instead and compete on price.
Airlines are famous for making only meager profits, especially considering the capex required to play.
Since Cloud is still a relatively immature industry, there's still room for niches, just like the airline industry has regional airlines. All GPU cluster anybody? Bare-metal Private Servers? Digital Ocean and Rackspace are chugging along just fine.
How about selling of Cloud services that run on top of AWS? Is that still Cloud? Dropbox famously started off just running on top of Amazon's S3, and I'd definitely call them Cloud. How about if you setup Heroku for Erlang? Scala? No billion dollars of Capex required, and I'd still definitely call Heroku a Cloud business.
Trying to compete with the likes of Amazon, Microsoft, or Google without billions of dollars is tilting against windmills, but to say 'getting into cloud' requires several billion dollars at the outset is a bit of an overstatement.
You already lost the game. The entire point of cloud computing is you don't need any of the features that Dell and HP heap onto their servers. Every port, every button, every LED costs you another couple hundred mW.
I guess by "getting into cloud" I meant "creating a competitor to AWS".. I agree that Dropbox, Heroku and friends are all cloud businesses but they are not direct competitors to Amazons IaaS business.
If they IPO'd, Bezos would be under humungous pressure to give it all out as dividends. Given his business beliefs, it'll never happen. It's not like they have cashflow problems anyway.
They'll spin it off one day, for the same reason Walmart sold off its massive trucking business.
AWS is eventually going to be a $30 billion sales business, capable of generating $3+ billion in net income. It'll legitimately be a nearly $100 billion market cap company unto itself in ten years. If Amazon is smart, they'll wait until it achieves a much larger scale before spinning it off, it's obviously a huge pot of gold in the equity value.
If they spin it off, it likely wouldn't IPO, Amazon would be the only stock holder. All profits from AWS are already factored into Amazon's stock price, another IPO would be unnecessary
There's no fundamental reason they couldn't spin off and then IPO, right?
I agree, it seems unlikely in the near future given Amazon's history, but it could happen. Maybe 10-20 years from now when Bezos has retired, a new CEO or three has been in place and the public markets aren't as forgiving of Amazon as they are now.
I doubt it, AWS wills be one of the few profitable bright spots in amazons earnings calls. Clearly they're interested in developing it further and making it a key part of their business. Generally companies spin of areas if it's outside of their core business.
I highly doubt this. Amazon's long-term strategy is to sell its infrastructure (servers, shipping, etc). This allows them to not only compete with competitors but sell pickaxes.
You do that when the value inside the company is being perpetually vastly under-represented (combined with shareholders applying a lot of pressure to unlock, say, a stagnant stock price).
For example, if AWS is worth $100 billion in ten years, and Amazon as a whole is only being valued at $150 billion in the public market at the time. Separate the two might be worth $100 billion each at that point.
The argument for eBay spinning off PayPal is this same premise - that PayPal is being undervalued by a lot hiding inside eBay.
eBay is extremely profitable, far more so than PayPal. PayPal's margins are not particularly impressive.
PayPal however is growing much faster than the auction platform (which is hardly growing).
The old processors like Visa and Mastercard have had amazing value increases in the last ten years. Visa is now a $160 billion company with 40% net income margins. PayPayl is a very attractive target for the big four of Visa, Mastercard, Discover, Amex. That will drive up its perceived value. One of those big four is very likely to go after a merger or acquisition of PayPal after the spin-off.
Pretty unfair comparison in that article. Microsoft including Office 365 and Dynamics in that number totally masks Azure revenue. It would be a more fair comparison to see AWS vs Azure vs GCC.
That article doesn't support your point, except perhaps for IBM and it's hazy to me what exactly that revenue is. It's certainly not from the type of developer-targeted infrastructure services that AWS is.
As for Microsoft, quoting directly from your link: "One person has told Business Insider that Azure revenue is at $1 billion lifetime since its debut in 2011, but is accelerating quickly."
I thought that the potential profits of cloud business were already being factored in the current evaluation, but apparently it was more profitable than the analysts (which were probably imagining the same thin margins as the retail business) expected.
I don't think the growth will accelerate as the article claims as the barrier to entry is becoming less and less each day. It should be interesting to see how it plays out.
Not parent but I'd guess they are talking about OpenStack but if they are they are wrong. Running a data center is no easy or cheap task. Sure you might have SOME of the logistics cut out for you using OpenStack but the barriers to entry are still VERY high.
Openstack + spare capacity in a colo facility + a bunch of few years old servers offloaded in a facilities auction and you can build one pretty quickly.
Tech isn't the hard part - barriers to get a service up and running are dropping drastically.
Hard part is marketing & scaling, and as AWS expands services there are risks from pure-play vendors that do just one slice of the stack 2-3x better than Amazon does.
It isn't as easy as you make it sounds, just a few thoughts:
1. OpenStack still has plenty of bugs and issues you are going to hit.
2. You'll still need a really good colo facility.
3. High bandwidth and Multiple internet providers are expensive. If you look at Amazon they have an excellent blend of bandwidth including direct connectivity to many eyeball providers (Comcast, Charter, RCN etc.) which usually makes your data get there quickly and prevents peering bottlenecks.
4. If you need more than one facility then you just get to double your costs.
5. People costs, you'll need people that can manage your infrastructure at scale.
6. Hardware capex can severely drain companies.
7. Vendor sprawl and support. (You still may need a CDN, DNS provider, etc.)
Doing your own thing can quickly become much more expensive than Amazon or other cloud providers.
The datacenters is also just part of it. All that software is itself part of the deal. That said, people could build competing services to some AWS products right on top of AWS' own services...
With superior software giving you higher utilization of the real server, you could theoretically turn a profit by reselling AWS capacity at prices cheaper than what AWS itself charges.
I would say that having a couple of billion annually to invest in cloud infrastructure and the economies of scale that it enables is a pretty big barrier to entry.
At the moment the only realistic challengers to AWS are Microsoft and Google.
Past numbers had SoftLayer as larger than Rackspace prior to the IBM acquisition. I imagine with the massive growth there post merger, the distance between Rackspace and SoftLayer IBM has only grown larger. That's probably the larger omission than Rackspace.
Does anyone have insight into AWS revenue per service? Does EC2 generate the bulk of the revenue? Is Lambda the fastest growth area? How is Redshift doing?
Yep - the article itself isn't terrible exciting outside of the core AWS numbers, but this now serves as the place for the HN community to talk about it - because the numbers are what's interesting.
I believe this happened because companies like http://www.cloudways.com/en/ are integrating Amazon cloud infrastructure smartly to build a service for application developers.
Usually, application developers are not good at server side configurations. They want something that's easy to setup and help them deploy their applications like WordPress, Magento, Drupal, Joomla etc.
Companies like Cloudways are taking away a lot of pain and giving those application developers a chance to easily setup their apps with premium support.
Don't you think that's attractive? and a business opportunity as well.
Compared that to a company like Google that can't make any money at all off their infrastructure except with search ads[1] :-) That is the real story for me. And a tiny bit personal because when I was there I didn't feel that platforms got nearly the respect they deserved for keeping the roads rolling.
Congratulations to the Amazon team, that is an impressive feat indeed.
[1] http://investor.google.com/earnings/2015/Q1_google_earnings....