Apparently, what happens in Vegas doesn't always stay in Vegas. Andy Jassy, senior VP of Web Services for Amazon.com (AMZN 0.08%), is in Sin City hosting an AWS tech conference. Over 6,000 attendees were on hand as Jassy put on the gloves, laced 'em up tight, and then proceeded to throw punches at some of the tech industry's heaviest of heavyweights.
Why would he call out the likes of IBM (IBM -0.98%), Oracle (ORCL -1.15%), and $10 billion data warehousing provider Teradata (TDC 0.88%), among others? Because Amazon is heading full steam into cloud computing, and Jassy wants the world to know he's going to attack the fast-growing industry, and nothing, or no one, is getting in his way .
Some background
Amazon.com's AWS unit has been around for years, and is reasonably successful. The data storage and remote computing services AWS provides already generate about $2 billion in revenue annually. And, if some analysts are to be believed, Amazon.com's cloud computing services could grow as much as 45% per annum, eventually becoming a $20-billion-a-year, revenue-generating machine.
AWS sales primarily come from small and medium-sized businesses, Amazon.com's cloud computing sweet spot. There are notable exceptions, including the likes of Netflix and Samsung, but most consider AWS and Amazon.com's low-cost cloud alternatives best suited to the "little guy." What Jassy did in Vegas on Nov. 28 was let the world know the days of AWS playing solely in the small-business sandbox are over.
The plan
Amazon.com's goal for dominating the cloud computing universe is simple: Undercut pricing of remote location tech solutions from IBM, Oracle, and Teradata, and anyone else who wants to go a few rounds. According to Jassy, the average cost of the big boys' cloud enterprise solutions' is around $20,000 per terabyte, per year. Jassy's contention? That's way too much, and Amazon.com has the solution.
In contrast to the big-ticket solutions from the IBMs and Oracles of the world, Amazon.com is rolling out its Redshift data warehousing service. Thing is, IBM, Oracle, and Teradata have a slew of cloud computing solutions, and their stockpile of alternatives is growing. As coincidence would have it, Oracle just announced its CloudWorld solution. So, what's the big deal about Amazon.com's Redshift?
According to Amazon.com, Redshift will change the cloud playing field in two ways: No. 1, it's priced at $1,000 per terabyte, per year -- about a 10th of what others charge. As CEO Jeff Bezos stated in the Amazon.com's recently released Q3 earnings report, "Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point."
No. 2, Redshift is ready for take on large, enterprise data storage and computing needs, meaning Amazon.com can break away from the notion that it's only a cloud provider for the "little guy." Lending credence to Amazon.com's assertion that Redshift is for everyone, Netflix, NASA/JPL, and Schumacher Group, are a few of the beta testers.
So what?
As one of the first to get on board the cloud, Amazon.com's done well to expand beyond its unrivaled position as the king of online retail. Its Kindle line of tablets remains an unbridled success in an increasingly competitive field. Prime Instant Video is expanding almost exponentially. Additionally, increasing its number of distribution centers will ensure the most recent 27% jump in revenue in Q3 will continue.
If you're looking for a fundamental basis to invest in Amazon.com, you won't find one. Amazon.com is a bet on Bezos, Jassy, and the future. The cost of opening 19 new Amazon.com fulfillment centers by year's end is taking its toll on current financial results, but with a little patience, the payoff could be big. With that said, calling out IBM, Oracle and Teradata, all firmly entrenched in enterprise cloud computing, is a gutsy move. For Amazon.com shareholders, let's just hope Jassy didn't just bring a knife to a gun fight.
