Issue No. 132: The differentiator is?

Last Word: Amazon’s AWS is the differentiator

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I’ve always viewed Amazon’s stock price as a bellwether for the entire eCommerce industry. It is a leading indicator of what is possible. Amazon ($AMZN) passed Exxon today, as the most fourth most valuable publicly traded company. But as much as I like to give eCommerce the credit, Amazon’s Web Services (AWS) is the enabler of much of Bezos’ success. AWS subsidizes Amazon.com product prices allowing the eCommerce provider to better compete against the likes of Walmart, Jet.com, eBay, and the rest. It is Amazon’s primary source of net profit. Here’s more about AWS, below.

via Ben Thompson and Stratechery.com:

In the case of AWS, Amazon isn’t simply renting you servers. I mean, yes, you can effectively do that, and a lot of companies do, and yes, Amazon has very real advantages when it comes to scale and availability, but if that were the only point of AWS then the biggest reason to think the company could win in the long run is a cultural one: the company has the stomach for low margins in the way its competitors don’t.

But again, AWS as on on-premise substitute isn’t that cheap, and the division’s margins are not only good but they are growing. To be sure, some of this is a function of having a head start and, well, brand; most new companies especially don’t even consider going anywhere else, and since AWS makes it easy and cheap to get started, by the time costs are a consideration the hassle of moving weighs much more heavily.

More than that, though, Amazon is already much further along in the Infrastructure-as-a-Service to Platform-as-a-Service transition than most people think; the key is that Amazon’s platform offerings tend to be so open and flexible that they look like infrastructure. The sheer breadth of services offered by AWS, including a growing number that enable completely serverless applications, is extremely impressive, and unlike traditional PaaS offerings they can be used in nearly any development environment.

See more of the issue here.

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