First in best dressed – Amazon Web Services a success story

Author: Charl Benckendorff                     Student ID: 216201542

Ask anyone about cloud computing 5 years ago and you probably won’t have received an answer as to what it is and what it does. Today however it’s big business the *aaS (* = Infrastructure, Software, Platform as a Service ) revolution has been one of the biggest technology disrupters in the last decade. The basic concept is large technology companies host online hardware, software and platforms for corporate consumers, small businesses and startups to utilise at a reduced cost compared to privately hosting your own datacenter infrastructure and systems.

cloud-computing

 

According to Gartner the public cloud services market is forecasted to reach $204 billion in 2016. AWS (Amazon Web Services) continuing to dominate worldwide market share at over 31% in the first quarter of 2016. With competition from the likes of Microsoft, IBM and Google, what does set AWS apart?

Cloud2016

This year AWS turns 10. In 2006 AWS released its cloud storage and cloud computing offering. AWS was the first company on the market to release such an offering. From its early days it has had almost 50 price slashes. Being the first on the market however doesn’t grantee success but coupled with being the best dressed does.

From its beginnings AWS has been a market leader. Gartner notes: AWS is a thought leader; it is extraordinarily innovative, exceptionally agile, and very responsive to the market. It has the richest array of IaaS features and PaaS-like capabilities. It continues to rapidly expand its service offerings and offer higher-level solutions. Although it is beginning to face more competition from Microsoft and Google, it retains a multiyear competitive advantage.

Gartner

Gartner: Magic Quadrant for Cloud Infrastructure as a Service 2015

In overlaying the marketing model STP (Segmentation, Targeting and Positioning) clear parallels can be drawn in the analysis of AWS’s current state and the success it’s had.

Segmentation

One selling point of AWS services is that it pitches its products to not only large corporates but also B2C such as Netflix, B2B such as SAP and your everyday low budget entrepreneurial startups who require the flexibility in scaling up services as required. To further strengthen this AWS have positioned themselves to be global leaders by saturating worldwide geographical points of presence above and beyond its competitors. Within the Australian finance sector for example where companies must store data within the country of registration due to regulatory bodies such as APRA. So far AWS has continued on a positive trajectory in market segment domination and doesn’t look to be slowing down with 4 new regions coming soon.

Global_Infrastructure_global-infra_6.14

Targeting

For as little as $15 per month small business\startups can take advantage of AWS virtual servers offering. Compare this to the cost of a small business DELL server at around $2000 up front. Expand this figure out to large IT corporates and add in additional services and you have a pay as you go recipe for success. This year Q1 profits speak for themselves at $2.57 billion this is up 64% from a year ago. With operating costs at $604 million, there is no question AWS is onto a good recipe from a ROI standpoint. Given the YoY growth AWS could expect more price reductions and better cost efficiency. With ongoing growth from investors FY17 profits are look very healthy.

AWS-Segment

Positioning

With AWS leading the Cloud Services in size, points of presence, diversity in business uptake as well as innovation in offering a multitude of services it has strategically placed itself as a top tier provider with a fruitful future. Whilst pricing is comparable to the likes of Microsoft offerings it does provide additional services and draws in startups with its AWS Activate program which provides free services and discounts. It has been a proven contender in the innovation space also which has kept AWS ahead of the pack. It is clear AWS has a ‘catch all’ strategy from the basement developer to the large IT Corporates.

A quick take of how AWS SWOT analysis stacks up and it’s obvious from an internal (the S&W) perspective the company’s strengths out strip its weaknesses. One key weakness to focus on is a self-serve model – Think simplicity, intuitive in use and ease of provisioning services for the non-technical customer base. When assessing external (O&T) factors, AWS are positioned well however overcoming competitor market share creep needs focus as market share statistics have revealed, by no means a threat given the gap however to be closely monitored.

Strengths

First to market in 2006

Large services offering

Large client base

Capacity 5 X Capacity that of 14 competitors

Higher Investment than business rivals

Weaknesses

Outages

Complexity for customers

Opportunities

Growing market for big businesses

Server\storage costs less in the cloud so business want to move to the cloud

Growing suit of products and services that complement AWS

Continued investments and expansions

Threats

Hardware pricing

Competitors

Price Wars

Technology trends

References:

Amazon Web Services. (2006) Announcing Amazon Elastic Compute Cloud (Amazon EC2) – beta. [Online] Amazon Web Services. Available at: https://aws.amazon.com/about-aws/whats-new/2006/08/24/announcing-amazon-elastic-compute-cloud-amazon-ec2—beta/ [Accessed 24 Jul 2016]

Amazon Web Services. (2016) AWS Activate [Online] Amazon Web Services. Available at: https://aws.amazon.com/activate/ [Accessed 24 Jul 2016]

Amazon Web Services. (2016) AWS Global Infrastructure [Online] Amazon Web Services. Available at: https://aws.amazon.com/about-aws/global-infrastructure/ [Accessed 24 Jul 2016]

Bourgeault, G. (2015) Amazon’s Strategy To Dominate Cloud Computing With AWS [Online] Seeking Alpha. Available at: http://seekingalpha.com/article/3567446-amazons-strategy-dominate-cloud-computing-aws [Accessed 24 July 2016]

Chu, B. (2013) Amazon Web Services SWOT & Competitor Analysis [Online] Slideshare. Available at: http://www.slideshare.net/BessieChu/amazon-web-services-swot-competitor-analysis?next_slideshow=1 [Accessed 24 Jul 2016]

DELL (2016) PowerEdge Tower Servers  [Online] DELL. Available at: http://www.dell.com/au/business/p/poweredge-tower-servers [Accessed at 24 Jul 2016]

Iacobucci, D 2014, Marketing Management (MM4), Student Edition, South Western, Cengage Learning, Mason USA.

Say, M. (2015) AWS now 10X the size of its competitors: Is the cloud arms race over? [Online] TechRepublic. Available at: http://www.techrepublic.com/article/aws-now-10x-the-size-of-its-competitors-is-the-cloud-arms-race-over/ [Accessed 24 July 2016]

Soper, T. (2016) Amazon’s cloud computing cash cow: AWS, now a $10B business, fuels record quarter for company [Online] GeekWire. Available at: http://www.geekwire.com/2016/amazons-cloud-computing-cash-cow-aws-now-10b-business-fuels-record-quarter-company/ [Accessed 24 Jul 2016]

Stamford, C. (2016) Gartner Says Worldwide Public Cloud Services Market Is Forecast to Reach $204 Billion in 2016. [Online] Gartner. Available at: http://www.gartner.com/newsroom/id/3188817 [Accessed 24 Jul 2016]

Synergy Research Group. (2016) Big Four Still Dominate in Q1 as Cloud Market Growth Exceeds 50%. [Online] Synergy Research Group. Available at: https://www.srgresearch.com/articles/gang-four-still-racing-away-cloud-market [Accessed 24 Jul 2016]

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