| | | RE:Alibaba cloud unit sets sights on Amazon in $1 billion global push
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That is a paltry amount compared to Amazon, Google or Microsoft.
theplatform.net
When it comes to big iron, few companies on the planet have made investments in hardware over the few years quite like Amazon Web Services. As we have detailed at length here at The Platform, the company continues to push the efficiency limits on both the hardware and software side to be not only price-attractive (but not the cheapest), but rich in terms of the storage, network, and application services it can provide.
“We are seeing continued increases in both usage, sequentially and year over year. We are also seeing a great efficiency in the business on a cost basis. Innovation is accelerating, not decelerating. We had over 350 significant new features and services…and while pricing is certainly a factor, we don’t believe it is always the primary factor,” Olsavsky said during the quarterly call for investors.
“We do realize it’s a capital-intensive business and we have modeling that shows it’s going to be a very – it is a very good business for us and that’s what we aim for as long-term return on invested capital and free cash flow. So, we’re certainly cognizant of the capital part of the calculation.”
As we reported back in April, most of the Amazon datacenters have somewhere between 50,000 and 80,000 servers. If you do some math on that, you get a server count that ranges from a low of 1.4 million machines (that’s 50,000 machines each with one datacenter in each availability zone) to a high of 5.6 million machines (if you assume 65,000 servers per datacenter and an average of three datacenters per zone).
True to retail fashion, AWS is using the breadth and depth of its cloud computing offering as well as continually lowered pricing to drive its business, and the strategy seems to be working with such high growth in the first quarter. It would be interesting to see precisely how elastic demand is for EC2 compute and S3 and EBS storage services, and only AWS knows for sure because it is the only company with the data about how its customers are behaving. It is also fascinating to ponder how far AWS can push down prices and still drive up usage on its cloud while maintaining – or perhaps even expanding – its profitability. It takes a lot of investment to keep building up the AWS flywheel and keep it spinning, as you can see from Amazon’s overall capital expenditures chart above. No one knows for sure how much of this is allocated to AWS and how much is allocated to the other Amazon business units, but presumably AWS accounts for a large portion of this capital expense.
Thus far, only Google and Microsoft have been able to keep pace with such an investment, and both companies have their own reasons for building infrastructure aside from selling it as a service. We think that the big will keep getting bigger in the public cloud because of the enormous pricing benefits from those who buy in volume, and that means AWS, with such a big lead over its rivals, will continue to attract more customers and drive up usage and therefore the gear it needs to buy for the next wave of expansion. If it took Amazon eight years to get its first million customers, it will probably take half that time or less to get the next million, and its cloud could more than double in size during that time, too. |
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