Categories: Analyst Blogs
Andy Jassy is Amazon’s new CEO. Now for the real question no one is yet asking: Who will succeed Jassy?
Jassy built Amazon Web Services from the ground up to become what it is today – the number 1 leader in cloud services generating $40B and presently growing at a rate of 33% per year. His contributions have resulted in contributing more profit to Amazon than all of its other business segments combined, in spite of the fact that AWS contributes only 12% to Amazon’s total net sales. As he has done so, he has also democratized computing. Anyone with a credit card and coding skills can now harness the power of AWS’ vast resources. If AWS is to continue on its current trajectory, his successor must be equal to the task which involves:
1. Continuing to scale-up AWS infrastructure while holding down cost
2. Delivering new and enhanced services to enterprise customers – both off and on premises
3. Doing both of the above in the face of growing competition from Microsoft, Google, and IBM – three behemoths focused on taking market share away from AWS.
A common belief among analysts is that the industry is still in its early days of cloud adoption. As Jassy himself pointed out at the last Amazon re:Invent in December of last year, 96% of an estimated $3.6 trillion in global IT spending has yet to shift to the cloud. His pursuit of this opportunity over the last few years has been perhaps the most aggressive of any of his competitors. The pace at which AWS introduced new services was relentless. His command of them was masterful. And he was never shy of telling enterprise IT executives that he could deliver more new IT services in a single year than they could in a lifetime. (Yes, a bit of an exaggeration, but that is the way he comes across on the re:Invent stage.)
AWS now has the attention of Enterprise IT. When surveyed by analyst firms including Evaluator Group , IT executives typically rank it #1 ahead of Microsoft Azure and Google cloud when rating usage. Enterprise IT users are moving workloads from their data centers to the cloud at an average 20% pace per year and AWS is currently getting more of that business than anyone else. But in addition, AWS is now attempting to make inroads into the data center with a product called Outposts. With Outposts, AWS is essentially saying to customers, if data cannot leave your premises, we will bring our cloud services to your data center. It is another aggressive move and we can expect more in this vein.
But chinks in the armor remain. Cost – and perhaps more importantly, an inability to predictably manage cost – certainly slows adoption if not inhibiting adoption altogether for some enterprises. Complexity, the number of offerings and their diversity makes it difficult to navigate and fully leverage AWS services. New skill sets are also needed to design and deploy applications that take maximum advantage of AWS infrastructure. And then there are still the sticky-wickets of security and governance, only partially being addressed by Outposts.
What Jassy has shown IT is how to build a highly profitable, growth-oriented services business. He promises to lower costs through massive infrastructure scale and platform automation while convincing enterprise customers that, even though cloud computing at AWS costs them more when compared to running applications in the corporate data center, paying the premium is worth the investment.
That is a difficult thing to do – particularly when pushing forward a new way of computing to notoriously conservative users. Enterprise IT buyers have historically been very sensitive to the total cost impact of acquiring a solution (TCO), and measure value in terms of return on investment (ROI). The new leadership will need to appeal to the historical Enterprise if they are it to change the way 80% of enterprise IT operates.
AWS’ competitors could see the change in leadership as an opportunity to exert more competitive pressure. Microsoft Azure continues to build on its strength in enterprise desktop and database applications. Google is making inroads with AI in the cloud. And IBM Cloud recently offered an aggressive pricing plan. Jassy’s successor must be able to sustain growth in a market where competitors work to drive down cloud computing cost while delivering even better value. That person will also be looked on to continue to produce the lion’s share of Amazon’s profits.