Andy Jassy’s rise to Amazon CEO shows the growing power of the cloud

The battle for the cloud is unfolding in all industries (from video games to cars to space) and to businesses large and small.

For Amazon, cloud computing has been a booming business that is very lucrative. Amazon Web Services, or AWS, generated just over 10% of Amazon’s total sales in the last quarter of last year, but earned more than half of the company’s operating profits during the period. AWS revenue rose 28% in the three months prior to the previous year to $ 12.7 billion and its operating profit was $ 3.6 billion.

For executives, the cloud is increasingly becoming a springboard for the business ladder. Microsoft CEO Satya Nadella led the business in the software giant’s cloud before being elevated to the top job in 2014. International business machines Corp.

last year he addressed his cloud chief in appointing a new CEO to help revive growth.

Jassy’s appointment — replacing Amazon founder Jeff Bezos as CEO in the third quarter — is especially noteworthy because Jassy takes over not only from a tech company, but from one of the largest retailers. Of the world.

“This speaks to the importance that the cloud is becoming in our economy,” said Rishi Jaluria, an analyst at investment research firm DA Davidson & Co. “With Andy Jassy at the helm of all of Amazon, it shows how the company wants to bring that DNA to the core of AWS for all of Amazon.”

The breadth of tools that Amazon and others now offer through the cloud has exploded as companies in all industries gather more data about their products, customers, and employees. Cloud vendors now offer applications to, for example, help manage and analyze this amount of information, increasingly using artificial intelligence programs to automate processes.

Investors are increasingly rewarding companies that have adopted cloud computing and have had a weaker view of people struggling to adapt.

Snow flake Inc.,

a company that offers tools to help companies manage their data across multiple clouds, went public last year in a public box office offering. Shares, below December highs, have risen about 18% since their debut. The data analytics start-up Databricks Inc. it recently raised $ 1 billion, giving the San Francisco-based company a $ 28 billion valuation. Salesforce.com Inc.,

Launched more than 20 years ago as a cloud-based software company, it has become one of the largest providers of enterprise tools in the United States and has used its growing fortune to help fund deals, including an end-to-end deal. from last year to buy collaborative software in the cloud-based workplace provider Slack Technologies Inc.

Companies that took a long time to adopt the cloud are trying to catch up. Larry Ellison, founder and CEO of Oracle database provider Corp.

, once rejected cloud computing as a fad. In recent years, Oracle has stepped up its cloud computing efforts and sought out AWS staff. Ellison now regularly trumpets the company’s cloud exploits on earnings calls and last year landed the popular video conferencing company Zoom Video Communications Inc.

as a cloud client to optimize Oracle credentials.

At the start of the pandemic, when U.S. companies shrank, multi-year growth in cloud spending seemed at risk. Salesforce narrowed its year-round outlook as it provided some struggling customers with a paid vacation. IBM in April withdrew its guidelines over the entire year.

But reality played out differently. The pandemic has overfed the cloud as companies rushed to adopt tools to help them tackle remote work and other challenges during the health crisis. Microsoft’s Azure cloud before the pandemic had seen a slow-growing pace as it gained scale. This was reversed in recent months. Azure sales increased 50% year-on-year in the December quarter, compared to 48% in the previous quarter.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation that is sweeping all businesses and all industries,” Nadella said last month.

Amazon is the clear leader in cloud sales, although companies differ in how they calculate revenue generated through these activities. AWS had a market share of around 34% at the end of last year, according to Synergy Research Group. Microsoft was second with a 20% share, but has been narrowing the gap, according to Synergy Research.

Amazon’s rise to the cloud hasn’t been without its challenges. In addition to increased competition, some retailers, such as Walmart Inc.

—They are shunning AWS and teaming up with rivals because of concerns about giving Amazon more business and power.

The cloud is also a political minefield as it becomes the center of everyday life. Amazon last month was caught up in the full question of what content to allow or ban on its platform. AWS kicked the conservative social network Parler out of the cloud, saying the client did not properly control its content and did not remove content that violated Amazon’s terms and conditions. Talking is suing Amazon for action.

When a House court last year issued a report on the antitrust concerns of large technology companies, it said AWS provides a key infrastructure for companies competing with Amazon. “This creates the potential for a conflict of interest in which cloud customers are forced to consider sponsoring a competitor, rather than selecting the best technology for their business,” the committee wrote. Amazon has said it does not use AWS to take advantage of its retail sales.

Amazon also caught the attention of lawmakers when a former employee was arrested in 2019 for orchestrating the Capital One Financial hack Corp.

Write to Aaron Tilley to [email protected]