In the seven years since Bezos wrote that letter, operating income from AWS has skyrocketed 1,950%, compared with around 715% income growth in Amazon’s other business units combined.
The growth at AWS occurred under the leadership of Andy Jassy, the 24-year Amazon veteran who helped the company pioneer cloud computing and who has overseen AWS’s ascension to the top of the increasingly competitive cloud market.
While it has been obvious that AWS is Amazon’s future since at least 2015, “this just seals the deal,” said James McQuivey, principal analyst at Forrester.
“This business grows faster, it scales faster,” McQuivey said. “If you just add it up — yes, a lot of people need to buy things, they need to watch stuff online, they need to ask Alexa what temperature it is outside — but infinitely more people are touched each day by cloud services.”
The future of AWS
Jassy was there when Amazon decided to launch AWS as a separate company that served Amazon.com just as it would any external customer.
And Jassy’s experience growing AWS makes him a good fit to handle the scale of the broader company, experts say.
“Few people on the planet have the ability to manage the hyper-growth machine that Amazon has been [better] than Andy Jassy,” said Nicholas McQuire, vice president of enterprise research at CCS Insight. “And then of course you layer in the most important thing: the ingrained culture and leadership aspects from inside Amazon, which obviously he displays and has proven himself around.”
And as the former cloud boss, Jassy is well positioned to understand how to most effectively integrate AWS with Amazon’s other offerings for continued growth, analysts say.
“He will understand the importance of all the assets, as opposed to, historically, AWS is just this thing on the side that was boring and was a cash cow,” McQuire said.
Amazon is expected to increase capital expenditures on cloud infrastructure by 11% in 2021, “to reduce the risk that AWS runs out of capacity in light of the strong Cloud demand they’re seeing,” according to Morgan Stanley analyst Katy Huberty.
“We view this as a major step up in the cloud arms race with crosstown rival Microsoft,” Wedbush analyst Dan Ives said in a note to investors Tuesday. “Jassy is an undisputed cloud titan and has been a key force in getting AWS to the top of the cloud mountaintop over the past decade. That said, we believe the tide is shifting in the cloud arms race as Microsoft … is taking market share vs. AWS.”
A major question now is who will take over running AWS through its next phase of growth. One possibility is Matt Garman, who was promoted last year to the top sales and marketing role at AWS after working as vice president of the division’s compute services for seven years.
“He’s very well regarded in the business, understands the technology, particularly the infrastructure side of the business which is core to AWS’s strengths in the market,” McQuire said of Garman.
Amazon’s future challenges
As he transitions from leading AWS to running the larger company, Jassy will step into some big shoes — and some big challenges.
Among them, Jassy has championed one of Amazon’s most controversial products: the facial recognition software, Rekognition.
Greer added Amazon’s business model is largely is based on surveillance — from its knowledge of what you buy and what you ask Alexa to the data gleaned via Rekognition and its Ring doorbells. “That data is where their power comes from,” she said.
Jassy could be just the person to address such concerns because of his experience convincing some of the world’s biggest companies and government agencies to entrust their crucial digital infrastructure to Amazon, CCS Insight’s McQuire said.
“He understands the importance of trust in the brand,” McQuire said. “He’s willing to kind of pull the veil up a little bit on how Amazon operates that the wider public doesn’t know, for example, how they treat Amazon.com as a customer … That importance of trust, he understands that from the big deals he’s done.”
–CNN Business’ Rachel Metz contributed to this report