Andy Jassy's Climb to Amazon CEO Shows the Cloud's Rising Power
By Aaron Tilley
The elevation of Andy Jassy to become the next chief executive
of Amazon.com Inc. is one of the clearest signs yet that fortunes
in the tech industry are increasingly made in the cloud.
Mr. Jassy was instrumental in helping the online retailing giant
he joined in 1997 to also become a juggernaut in cloud-computing,
the business of renting servers and software to customers largely
on a pay-as-you-go model. It is a market that could top $300
billion globally this year, according to research firm Gartner
Inc., and pits Amazon against tech giants like Microsoft Corp. and
Alphabet Inc.'s Google.
The battle for the cloud is playing out across industries --
from videogames to cars to space -- and companies large and
For Amazon, cloud computing has been a booming business that is
massively lucrative. Amazon Web Services, or AWS, generated little
more than 10% of Amazon's total sales in the final quarter of last
year but yielded more than half the company's operating profit in
the period. AWS revenue advanced 28% over those three months from
the year prior to $12.7 billion, and its operating profit was $3.6
For executives, the cloud is increasingly becoming a
steppingstone on the corporate ladder. Microsoft CEO Satya Nadella
ran the software giant's cloud business before his elevation in
2014 to the top job. International Business Machines Corp. last
year turned to its cloud chief when it came to naming a new CEO to
help revive growth.
Mr. Jassy's appointment is particularly noteworthy because he is
taking over not just a tech company but one of the world's largest
retailers. "This speaks to how important the cloud is becoming to
our economy," said Rishi Jaluria, an analyst for investment
research firm D.A. Davidson & Co. "With Andy Jassy in charge of
all of Amazon, it shows how the company wants to bring that DNA at
the core of AWS to all of Amazon."
The breadth of tools now offered by Amazon and others via the
cloud has exploded as companies across industries collect more data
on their products, customers and employees. Cloud vendors now
provide applications to, for instance, help manage and analyze that
trove of information, increasingly using artificial intelligence
software to automate the processes.
Investors increasingly are rewarding businesses that have
embraced cloud-computing, and they have taken a dimmer view of
those struggling to adapt.
Snowflake Inc., a company that offers tools to help companies
manage their data across multiple clouds, went public last year in
a blockbuster public offering. Shares, down from their December
highs, are up about 18% since their debut. Data-analytics startup
Databricks Inc. 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, has grown into one of America's biggest providers of
enterprise tools and has used its rising fortunes to help fund
deals, including an agreement late last year to buy cloud-based
workplace collaboration software provider Slack Technologies
Companies that were slow to embrace the cloud are trying to
catch up. Larry Ellison, the founder and executive chairman of
database provider Oracle Corp., once dismissed cloud computing as a
fad. In recent years Oracle has ramped up its cloud-computing
efforts and poached staff from AWS. Mr. Ellison now regularly
trumpets the company's cloud exploits on earnings calls and last
year landed popular videoconference company Zoom Video
Communications Inc. as a cloud customer to burnish Oracle's
Early in the pandemic, when American businesses hunkered down,
the multiyear growth run in cloud spending seemed at risk.
Salesforce cut its full-year outlook as it provided some struggling
customers a payment holiday. IBM in April withdrew its full-year
But reality played out differently. The pandemic has
supercharged the cloud as businesses rushed to adopt tools to help
them cope with remote working and other challenges during the
health crisis. Microsoft's Azure cloud before the pandemic had seen
a slowing rate of growth as it gained scale. That reversed in
recent months. Azure sales increased 50% year-over-year in the
December quarter, up from 48% during the prior quarter.
"What we have witnessed over the past year is the dawn of a
second wave of digital transformation sweeping every company and
every industry," Mr. Nadella said last month.
Amazon is the clear leader in the cloud by sales, though
companies differ in how they calculate revenue generated through
those 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% slice but has been narrowing the gap, according
to Synergy Research.
Amazon's rise in cloud hasn't been without challenges. In
addition to the increased competition, some retailers -- like
Walmart Inc. -- are shunning AWS and teaming with rivals because of
concerns about giving Amazon more business and might.
The cloud also is increasingly a political minefield as it
becomes more center stage in daily life. Amazon last month was
caught in the fraught question of what content to allow or bar on
its platform. AWS kicked conservative social network Parler off its
cloud, saying the customer didn't adequately police its content and
failed to remove content that violated Amazon's terms of service.
Parler is suing Amazon over the action.
When the House panel last year issued a report on antitrust
concerns around big tech companies, it said AWS provides key
infrastructure for businesses that compete with Amazon. "This
creates the potential for a conflict of interest where cloud
customers are forced to consider patronizing a competitor, as
opposed to selecting the best technology for their business," the
committee wrote. Amazon has said it doesn't use AWS to advantage
its retail arm.
Amazon also drew lawmaker attention when a former employee was
arrested in 2019 for orchestrating the hack of Capital One
Write to Aaron Tilley at firstname.lastname@example.org
(END) Dow Jones Newswires
February 03, 2021 09:55 ET (14:55 GMT)
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