In today’s Cloud Wars Minute, I dive into the significance of AWS’s 12% growth rate.
Highlights
00:01 — AWS is an example of the Innovator’s Dilemma, the classic business book by Clayton Christensen, where he examines the notion that companies that come into a market are wildly disruptive, then get so consumed by the model they’ve created, that they fail to continue to innovate and are overtaken.
01:19 — I’m also clearly recognizing that AWS is now on a $92 billion annualized run rate, with its Q3 revenue of $23.1 billion. But in this growth market, the regular laws of physics don’t apply. AWS is falling way out of whack with some of its competitors in the market.
02:10 — In large part, this is because the world has tilted radically towards software differentiation. Whether you want to call it the artificial intelligence (AI) revolution, the data-powered economy, the world of digital business, however, you want to describe that — the power behind the throne is software.
02:54 —Amazon CEO Andy Jassy made a big point on last week’s Q3 earnings call to express relief. “Hey, we’ve stabilized.” Well, I’m sorry, but in the Cloud Wars, I don’t think the 12% benchmark is one that anybody ought to get overly excited about.
03:41 — Microsoft, in the same period, had its cloud business grow 24%. Google Cloud is much smaller, but it grew 22%. Oracle is significantly smaller than AWS, but its cloud infrastructure business, which is the main area where AWS plays, grew 66% in its last quarter.
05:00 — Jassy talked at great length about the new AI chips that AWS has introduced. The duration, the span of time that Jassy devoted to talking about chips, which is probably not on the top of the priority list in the minds of business leaders. But I think it’s the mindset of the infrastructure leader that is part of what is causing these troubles for AWS.
05:52 — I think AWS has got a tough road ahead because its competitors are throwing everything they possibly can into this. It’s no longer clearly AWS’s show.
