No, AWS will not be spun out as a separate company

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Wired on AWS:

In the first half of 2015, revenue from AWS jumped 65 percent and accounted for 7 percent of Amazon’s overall revenue—and 37 percent of its profits.

Though they share some infrastructure, AWS and Amazon’s e-commerce and hardware businesses are very different. But AWS chief Andy Jassy has been clear his boss, founder Jeff Bezos, doesn’t plan to spin AWS out. AWS provides the back-end computing infrastructure that powers Amazon’s Kindles as well as Prime streaming videos, and it will be necessary as Amazon prepares for a future of drones and Echo-like devices.

I wrote about this in ​“Amazon’s AWS advantage”:

Netflix is a customer, Instant Video is a part of the provider. Amazon has far lesser costs as the owner of AWS. This is important because it helps tremendiously with the business model. (..)

Where else might AWS help Amazon strategically?

Think about what Amazon is doing at the hardware front: Its Dash, the Dash buttonsEcho, even the Fire TV and the Fire tablets. These are all very different forays into a post-PC world. A world of connected devices. The tech industry loosely refers to this as the Internet of Things. (IoT)

AWS is mature and at a big enough scale now that Amazon can throw almost anything at it. This includes the need to process data from millions or even billions of connected devices. (..)

It does not matter how exactly the Internet of Things will take shape. Amazon’s AWS will play almost certainly a large part at its backbone. The cloud itself might not become the main coordinating factor in the IoT. But whereever and whatever the cloud’s job will be in the Internet of Things AWS will be there and it will be a strong household name.

Consider the platform ramifications of this for Amazon.

There is a lot of talk these days on how much potential could be unlocked by a separate AWS company. There certainly is potential there but one should not underestimate the potential for AWS under the Amazon roof.

AWS powers Amazon’s services, it generates significant profits on its own and has tremendious value as an enabler of future platforms by Amazon.

Wired compares Amazon’s approach to Google’s Alphapet and concludes that a “multi-headed conglomerate” (Alphabet) will go head to head against a “monolith” (Amazon).

I like to compare Amazon’s approach more with Rocket Internet’s “multi-headed conglomerate”, because the latter does a bit more stuff in online retail than Google does. I wrote about Rocket Internet’s strategy compared to Amazon’s and Zalando’s:

I don’t believe [Rocket Internet’s strategy, based on local network effects within a country] will work well in direct competition with bigger companies like Amazon, Zalando, Alibaba or Uber. Because here’s the thing: A global online retailer can exert network effects in more dimensions than locally confined companies can. (besides plain scale effects which also come to fruition here)

If anything the last 20 years of Amazon (and especially the last years with Amazon Prime) have shown how much value there is to having it all under one roof.

So, no, AWS will remain at Amazon. And that is a good thing.

3 comments

  1. […] AWS: Officially launched in 2006 to the public, it is now a main driver of profits for Amazon. And AWS, additionally, provides a serious infrastructure advantage to Amazon. It will not take ten […]

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  2. […] No, AWS will not be spun out as a separate company […]

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