Amazon’s Cloud Services Shake up Competition

Amazon.com Inc. disclosed Thursday several details about its web service business, which clearly show that the division grows at a breath-taking pace with more than $1.5 billion in revenue reached in the first quarter.

According to the retailer, web-based services, including cloud storage, had become the company’s fastest growing business because it had reached a 50 percent increase from the same quarter last year.

The online retailer also reported that its operating income from web services business reached $265 million which marked a $20 million growth from last year.Amazon’s founder of the company, told reporters that Amazon Web Services was already a $5 billion business with an ever accelerating growth.

Amazon Web Services’ clients are mainly from the business sector such as tech start-ups and online giants such as Airbnb and Netflix. Amazon also provides computing power to high-profile news agencies such as the Washington Post.

In 2013, the Amazon Web Services won the trust of his clients after earning a contract with the CIA.

But Amazon’s web services business rise was a surprise even for its developers that currently still feel that they work for a start-up, rather than a multibillion dollar franchise. Amazon engineers usually “blame” customer obsession and a long-term vision for the business’ sheer success.

Although its cloud-hosting business is a small share of the Amazon Web Services division, Amazon currently is one of the most outstanding players on the cloud services market.

The online retailer is now ranked as the most important cloud infrastructure provider for government agencies, including the Pentagon and the Central Intelligence Agency. Although the retailer declined to disclose the exact number of its government clients, inner sources claim that there are more than 1,500 worldwide. Amazon also designed a special cloud storage space for extremely sensitive data.

Yet, Amazon faces strong competition coming from Microsoft and Google. Microsoft announced Thursday that its cloud business revenue saw a more than 100 percent increase. As a result, prices may go down, at least for government clients, tech experts estimate.

According to a research firm’s report for 2014, Amazon has the largest cloud infrastructure in the government business. Its infrastructure is about 14 times larger than any other cloud provider or the first 14 top-providers combined.

But Amazon rise was boosted by a federal directive that forced government agencies to move their operations to the cloud after they had consolidated their data bases.

Teresa Carlson, the Amazon chief executive in charge with the public sector business, said the company knew that government sector was a “huge market.” However, convincing officials of the utility of cloud computing was not an easy call. Many of them were reluctant about the safety of a pay-as-you-use service that stored vital data on a virtual environment.

But Amazon’s key strategy was to create a network of clients that were already catering for government agencies. Those clients, which were mainly IT companies, were virtually the ones to deliver the Amazon web services to the government.

Amazon also partnered with more open-minded agencies such as NASA’s Jet Propulsion Laboratory which easily adopted the new cloud services. For instance, Curiosity rover’s first images of Martian landscape were first uploaded on Amazon’s cloud.

Image Source: CNN Money