Andy Jassy
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AWS hits $10B for the quarter putting it on a $40B run rate
AWS, the cloud arm of Amazon, would be a pretty successful business on its own. Today, the company announced it has passed $10 billion for the quarter, putting the cloud business on an impressive run rate of more than $40 billion.
It was a bright spot for the company in an earnings report that saw it report net income of $2.5 billion, down $1 billion from a year ago.
Still, most companies would take that for the entire business, but AWS, which started off as kind of a side hustle for Amazon back in 2006, has grown into a powerful business all on its own. With a growth rate of 33%, it’s still growing briskly, even if it’s slowing down a bit as the law of large numbers begins to work against it.
Even though Microsoft has grown more quickly — in yesterday’s report Microsoft reported that Azure was growing at a 59% clip — AWS had such a big head start and controls a big chunk of the market share.
To give you a sense of how quickly this business has grown, Bloomberg’s Jon Erlichman tweeted the Q1 numbers for AWS since 2014, and it’s pretty amazing growth:
Amazon’s cloud revenue in Q1:
(Amazon Web Services)
Q1 2020: $10.2 billion
Q1 2019: $7.7 billion
Q1 2018: $5.4 billion
Q1 2017: $3.7 billion
Q1 2016: $2.6 billion
Q1 2015: $1.6 billion
Q1 2014: $1.1 billion— Jon Erlichman (@JonErlichman) April 30, 2020
In 2014, it was a $4 billion a year business. Today it is 9.1x that and still going strong. The good news for everyone involved is that this is a huge market, and while nobody could ever characterize the pandemic and it’s economic fall-out as good news for anyone, the fact is that it is forcing companies to move to the cloud faster than they might have wanted to go.
That should bode well for all the cloud infrastructures vendors, even as the economy shrinks, the kinds of services these vendors offer should be in more demand than ever, and that means these numbers could just keep growing for some time.
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DoD Inspector General report finds everything was basically hunky-dory with JEDI cloud contract bid
While controversy has dogged the $10 billion, decade-long JEDI contract since its earliest days, a report by the DoD’s Inspector General’s Office concluded today that, while there were some funky bits and potential conflicts, overall the contract procurement process was fair and legal and the president did not unduly influence the process in spite of public comments.
There were a number of issues along the way about whether the single contractor award was fair or reasonable, about whether there were was White House influence on the decision, and whether the president wanted to prevent Amazon founder Jeff Bezos, who also owns the Washington Post, from getting the contract.
There were questions about whether certain personnel, who had been or were about to be Amazon employees, had undue influence on the contents of the RFP or if former Secretary of Defense showed favor to Amazon, which ultimately did not even win the contract, and that one of Mattis’ under secretaries, in fact, owned stock in Microsoft .
It’s worth noting that the report states clearly that it is not looking at the merits of this contract award or whether the correct company won on technical acumen. It was looking at all of these controversial parts that came up throughout the process. As the report stated:
“In this report, we do not draw a conclusion regarding whether the DoD appropriately awarded the JEDI Cloud contract to Microsoft rather than Amazon Web Services. We did not assess the merits of the contractors’ proposals or DoD’s technical or price evaluations; rather we reviewed the source selection process and determined that it was in compliance with applicable statutes, policies, and the evaluation process described in the Request for Proposals.”
Although the report indicates that the White House would not cooperate with the investigation into potential bias, the investigators claim they had enough discussions with parties involved with the decision to conclude that there was no undue influence on the White House’s part:
“However, we believe the evidence we received showed that the DoD personnel who evaluated the contract proposals and awarded Microsoft the JEDI Cloud contract were not pressured regarding their decision on the award of the contract by any DoD leaders more senior to them, who may have communicated with the White House,” the report stated.
The report chose to blame the media instead, at least for partly giving the impression that the White House had influenced the process, stating:
“Yet, these media reports, and the reports of President Trump’s statements about Amazon, ongoing bid protests and “lobbying” by JEDI Cloud competitors, as well as inaccurate media reports about the JEDI Cloud procurement process, may have created the appearance or perception that the contract award process was not fair or unbiased.”
It’s worth noting that we reported that AWS president Andy Jassy made it clear in a press conference at AWS re:Invent in December that the company believed the president’s words had influenced the process.
“I think that we ended up with a situation where there was political interference. When you have a sitting president, who has shared openly his disdain for a company, and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make objective decisions without fear of reprisal.”
As for other points of controversy, such as those previously referenced biases, all were found lacking by the Inspector General. While the earliest complaints from Oracle and others were that Deap Ubhi and Victor Gavin, two individuals involved in drafting the RFP, failed to disclose they were offered jobs by Amazon during that time.
The report concluded that while Ubhi violated ethics rules, his involvement wasn’t substantial enough to influence the RFP (which again, Amazon didn’t win). “However, we concluded that Mr. Ubhi’s brief early involvement in the JEDI Cloud Initiative was not substantial and did not provide any advantage to his prospective employer, Amazon…,” the report stated.
The report found Gavin did not violate any ethics rules in spite of taking a job with Amazon because he had disqualified himself from the process, nor did the report find that former Secretary Mattis had any ethical violations in its investigation.
One final note: Stacy Cummings, Principal Deputy Assistant Secretary of Defense for Acquisition and Deputy Assistant Secretary of Defense for Acquisition Enablers, who worked for Mattis, owned some stock in Microsoft and did not disclose this. While the report found that was a violation of ethics guidelines, it ultimately concluded this did not unduly influence the award to Microsoft.
While the report is a substantial, 313 pages, it basically concludes that as far as the purview of the Inspector General is concerned, the process was basically conducted in a fair way. The court case, however involving Amazon’s protest of the award to Microsoft continues. And the project remains on hold until that is concluded.
Note: Microsoft and Amazon did not respond to requests from TechCrunch for comments before we published this article. If that changes, we will update accordingly.
Report on the Joint Enterprise Defense Infrastructure (Jedi) Cloud Procurement Dodig-2020-079 by TechCrunch on Scribd
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Big opening for startups that help move entrenched on-prem workloads to the cloud
AWS CEO Andy Jassy showed signs of frustration at his AWS re:Invent keynote address in December.
Customers weren’t moving to the cloud nearly fast enough for his taste, and he prodded them to move along. Some of their hesitation, as Jassy pointed out, was due to institutional inertia, but some of it also was due to a technology problem related to getting entrenched, on-prem workloads to the cloud.
When a challenge of this magnitude presents itself and you have the head of the world’s largest cloud infrastructure vendor imploring customers to move faster, you can be sure any number of players will start paying attention.
Sure enough, cloud infrastructure vendors (ISVs) have developed new migration solutions to help break that big data logjam. Large ISVs like Accenture and Deloitte are also happy to help your company deal with migration issues, but this opportunity also offers a big opening for startups aiming to solve the hard problems associated with moving certain workloads to the cloud.
Think about problems like getting data off of a mainframe and into the cloud or moving an on-prem data warehouse. We spoke to a number of experts to figure out where this migration market is going and if the future looks bright for cloud-migration startups.
Cloud-migration blues
It’s hard to nail down exactly the percentage of workloads that have been moved to the cloud at this point, but most experts agree there’s still a great deal of growth ahead. Some of the more optimistic projections have pegged it at around 20%, with the U.S. far ahead of the rest of the world.
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Amazon wants to depose president and secretary of Defense as part of JEDI protest
Today, AWS made public its Motion to Supplement the Record in its protest of the JEDI contract decision. As part of that process, the company has announced it wants to depose President Trump and Secretary of Defense Mark Esper.
When Amazon announced at the end of last year that it was protesting the DoD’s decision to award the $10 billion, decade-long JEDI contract to Microsoft, the company made clear that it was not happy with the decision. The company believes that the president steered the contract away from Amazon because of personal political differences with Amazon CEO Jeff Bezos, who also owns The Washington Post.
“President Trump has repeatedly demonstrated his willingness to use his position as President and Commander in Chief to interfere with government functions – including federal procurements – to advance his personal agenda. The preservation of public confidence in the nation’s procurement process requires discovery and supplementation of the administrative record, particularly in light of President Trump’s order to ‘screw Amazon.’ The question is whether the President of the United States should be allowed to use the budget of the DoD to pursue his own personal and political ends,” an AWS spokesperson said in a statement.
This is consistent with public statements the company has been making since the DoD made the surprise decision in October to go with Microsoft. It had been widely believed that Amazon would win the contract, and there was much wrangling and complaining throughout the procurement process that the contract had been designed to favor Amazon, something that the DoD repeatedly denied.
At AWS re:Invent at the end last year, AWS CEO Andy Jassy made it clear he was unhappy with the decision and that he believed the president showed bias. “I think that we ended up with a situation where there was political interference. When you have a sitting president, who has shared openly his disdain for a company, and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make objective decisions without fear of reprisal,” Jassy said last year.
Sources say that the DoD gave Amazon a written debriefing after the decision to award the contract to Microsoft, but the company is particularly upset that the department has failed to respond in a timely fashion to requests for additional information and questions, as required by law.
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Even as Microsoft Azure revenue grows, AWS’s market share lead stays strong
When analyzing the cloud market, there are many ways to look at the numbers; revenue, year-over-year or quarter-over-quarter growth — or lack of it — or market share. Each of these numbers tells a story, but in the cloud market, where aggregate growth remains high and Azure’s healthy expansions continues, it’s still struggling to gain meaningful ground on AWS’s lead.
This has to be frustrating to Microsoft CEO Satya Nadella, who has managed to take his company from cloud wannabe to a strong second place in the IaaS/PaaS market, yet still finds his company miles behind the cloud leader. He’s done everything right to get his company to this point, but sometimes the math just isn’t in your favor.
Numbers don’t lie
John Dinsdale, chief analyst at Synergy Research, says Microsoft’s growth rate is higher overall than Amazon’s, but AWS still has a big lead in market share. “In absolute dollar terms, it usually has larger increments in revenue numbers and that makes Amazon hard to catch,” he says, adding “what I can say is that this is a very tough gap to close and mathematically it could not happen any time soon, whatever the quarterly performance of Microsoft and AWS.”
The thing to remember with the cloud market is that it’s not even close to being a fixed pie. In fact, it’s growing rapidly and there’s still plenty of market share left to win. As of today, before Amazon has reported, it has a substantial lead, no matter how you choose to measure it.
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Despite JEDI loss, AWS retains dominant market position
AWS took a hard blow last year when it lost the $10 billion, decade-long JEDI cloud contract to rival Microsoft. Yet even without that mega deal for building out the nation’s Joint Enterprise Defense Infrastructure, the company remains fully in control of the cloud infrastructure market — and it intends to fight that decision.
In fact, AWS still owns almost twice as much cloud infrastructure market share as Microsoft, its closest rival. While the two will battle over the next decade for big contracts like JEDI, for now, AWS doesn’t have much to worry about.
There was a lot more to AWS’s year than simply losing JEDI. Per usual, the news came out with a flurry of announcements and enhancements to its vast product set. Among the more interesting moves was a shift to the edge, the fact the company is getting more serious about the chip business and a big dose of machine learning product announcements.
The fact is that AWS has such market momentum now, it’s a legitimate question to ask if anyone, even Microsoft, can catch up. The market is continuing to expand though, and the next battle is for that remaining market share. AWS CEO Andy Jassy spent more time than in the past trashing Microsoft at 2019’s re:Invent customer conference in December, imploring customers to move to the cloud faster and showing that his company is preparing for a battle with its rivals in the years ahead.
Numbers, please
AWS closed 2019 on a $36 billion run rate, growing from $7.43 billion in in its first report in January to $9 billion in earnings for its most recent earnings report in October. Believe it or not, according to CNBC, that number failed to meet analysts expectations of $9.1 billion, but still accounted for 13% of Amazon’s revenue in the quarter.
Regardless, AWS is a juggernaut, which is fairly amazing when you consider that it started as a side project for Amazon .com in 2006. In fact, if AWS were a stand-alone company, it would be a substantial business. While growth slowed a bit last year, that’s inevitable when you get as large as AWS, says John Dinsdale, VP, chief analyst and general manager at Synergy Research, a firm that follows all aspects of the cloud market.
“This is just math and the law of large numbers. On average over the last four quarters, it has incremented its revenues by well over $500 million per quarter. So it has grown its quarterly revenues by well over $2 billion in a twelve-month period,” he said.
Dinsdale added, “To put that into context, this growth in quarterly revenue is bigger than Google’s total revenues in cloud infrastructure services. In a very large market that is growing at over 35% per year, AWS market share is holding steady.”
Dinsdale says the cloud infrastructure market didn’t quite break $100 billion last year, but even without full Q4 results, his firm’s models project a total of around $95 billion, up 37% over 2018. AWS has more than a third of that. Microsoft is way back at around 17% with Google in third with around 8 or 9%.
While this is from Q1, it illustrates the relative positions of companies in the cloud market. Chart: Synergy Research
JEDI disappointment
It would be hard to do any year-end review of AWS without discussing JEDI. From the moment the Department of Defense announced its decade-long, $10 billion cloud RFP, it has been one big controversy after another.
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New Synergy Research report finds enterprise data center market is strong for now
Conventional wisdom would suggest that in 2019, the public cloud dominates and enterprise data centers are becoming an anachronism of a bygone era, but new data from Synergy Research finds that the enterprise data center market had a growth spurt last year.
In fact, Synergy reported that overall spending in enterprise infrastructure, which includes elements like servers, switches and routers and network security; grew 13 percent last year and represents a $125 billion business — not too shabby for a market that is supposedly on its deathbed.
Overall these numbers showed that market is still growing, although certainly not nearly as fast the public cloud. Synergy was kind enough to provide a separate report on the cloud market, which grew 32 percent last year to $250 billion annually.
As Synergy analyst John Dinsdale, pointed out, the private data center is not the only buyer here. A good percentage of sales is likely going to the public cloud, who are building data centers at a rapid rate these days. “In terms of applications and levels of usage, I’d characterize it more like there being a ton of growth in the overall market, but cloud is sucking up most of the growth, while enterprise or on-prem is relatively flat,” Dinsdale told TechCrunch.
Perhaps the surprising data nugget in the report is that Cisco remains the dominant vendor in this market with 23 percent share over the last four quarters. This, even as it tries to pivot to being more of a software and services vendor, spending billions on companies such as AppDynamics, Jasper Technologies and Duo Security in recent years. Yet data still shows that it still dominating in the traditional hardware sector.
Cisco remains the top vendor in the category in spite of losing a couple of percentage points in marketshare over the last year, primarily due to the fact they don’t do great in the server part of the market, which happens to be the biggest overall slice. The next vendor, HPE, is far back at just 11 percent across the six segments.
While these numbers show that companies are continuing to invest in new hardware, the growth is probably not sustainable long term. At AWS Re:invent in November, AWS president Andy Jassy pointed out that a vast majority of data remains in private data centers, but that we can expect that to begin to move more briskly to the public cloud over the next five years. And web scale companies like Amazon often don’t buy hardware off the shelf, opting to develop custom tools they can understand and configure at a highly granular level.
Jassy said that outside the US, companies are one to three years behind this trend, depending on the market, so the shift is still going on, as the much bigger growth in the public cloud numbers indicates.
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AWS wants to rule the world
AWS, once a nice little side hustle for Amazon’s eCommerce business, has grown over the years into a behemoth that’s on a $27 billion run rate, one that’s still growing at around 45 percent a year. That’s a highly successful business by any measure, but as I listened to AWS executives last week at their AWS re:Invent conference in Las Vegas, I didn’t hear a group that was content to sit still and let the growth speak for itself. Instead, I heard one that wants to dominate every area of enterprise computing.
Whether it was hardware like the new Inferentia chip and Outposts, the new on-prem servers or blockchain and a base station service for satellites, if AWS saw an opportunity they were not ceding an inch to anyone.
Last year, AWS announced an astonishing 1400 new features, and word was that they are on pace to exceed that this year. They get a lot of credit for not resting on their laurels and continuing to innovate like a much smaller company, even as they own gobs of marketshare.
The feature inflation probably can’t go on forever, but for now at least they show no signs of slowing down, as the announcements came at a furious pace once again. While they will tell you that every decision they make is about meeting customer needs, it’s clear that some of these announcements were also about answering competitive pressure.
Going after competitors harder
In the past, AWS kept criticism of competitors to a minimum maybe giving a little jab to Oracle, but this year they seemed to ratchet it up. In their keynotes, AWS CEO Andy Jassy and Amazon CTO Werner Vogels continually flogged Oracle, a competitor in the database market, but hardly a major threat as a cloud company right now.
They went right for Oracle’s market though with a new on prem system called Outposts, which allows AWS customers to operate on prem and in the cloud using a single AWS control panel or one from VMware if customers prefer. That is the kind of cloud vision that Larry Ellison might have put forth, but Jassy didn’t necessarily see it as going after Oracle or anyone else. “I don’t see Outposts as a shot across the bow of anyone. If you look at what we are doing, it’s very much informed by customers,” he told reporters at a press conference last week.
AWS CEO Andy Jassy at a press conference at AWS Re:Invent last week.
Yet AWS didn’t reserve its criticism just for Oracle. It also took aim at Microsoft, taking jabs at Microsoft SQL Server, and also announcing Amazon FSx for Windows File Server, a tool specifically designed to move Microsoft files to the AWS cloud.
Google wasn’t spared either when launching Inferentia and Elastic Inference, which put Google on notice that AWS wasn’t going to yield the AI market to Google’s TPU infrastructure. All of these tools and much more were about more than answering customer demand, they were about putting the competition on notice in every aspect of enterprise computing.
Upward growth trajectory
The cloud market is continuing to grow at a dramatic pace, and as market leader, AWS has been able to take advantage of its market dominance to this point. Jassy, echoing Google’s Diane Greene and Oracle’s Larry Ellison, says the industry as a whole is still really early in terms of cloud adoption, which means there is still plenty of marketshare left to capture.
“I think we’re just in the early stages of enterprise and public sector adoption in the US. Outside the US I would say we are 12-36 months behind. So there are a lot of mainstream enterprises that are just now starting to plan their approach to the cloud,” Jassy said.
Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy says that AWS has been using its market position to keep expanding into different areas. “AWS has the scale right now to do many things others cannot, particularly lesser players like Google Cloud Platform and Oracle Cloud. They are trying to make a point with the thousands of new products and features they bring out. This serves as a disincentive longer-term for other players, and I believe will result in a shakeout,” he told TechCrunch.
As for the frenetic pace of innovation, Moorhead believes it can’t go on forever. “To me, the question is, when do we reach a point where 95% of the needs are met, and the innovation rate isn’t required. Every market, literally every market, reaches a point where this happens, so it’s not a matter of if but when,” he said.
Certainly areas like the AWS Ground Station announcement, showed that AWS was willing to expand beyond the conventional confines of enterprise computing and into outer space to help companies process satellite data. This ability to think beyond traditional uses of cloud computing resources shows a level of creativity that suggests there could be other untapped markets for AWS that we haven’t yet imagined.
As AWS moves into more areas of the enterprise computing stack, whether on premises or in the cloud, they are showing their desire to dominate every aspect of the enterprise computing world. Last week they demonstrated that there is no area that they are willing to surrender to anyone.
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VMware Cloud is now live on AWS — and IT pros just did a little happy dance
When VMware announced it was partnering with AWS last fall, it turned more than a few enterprise heads. After all, we’re talking about one company that dominates virtual machines on-prem, and the other in the public cloud. Together, the two companies make a powerful combination — and VMware made the whole shebang official today at VMworld when it announced that VMware Cloud was live… Read More
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Why AWS has such a big lead in the cloud
When you look at the size of the cloud market, it’s astonishing that AWS is the undisputed leader, and probably will be for the foreseeable future. Considering the competition is the likes of Google, Microsoft, IBM and Oracle; AWS’s big lead is even more surprising. The question is how did AWS build such dominance? The simple answer is that it was first, but as Andy Jassy, the AWS… Read More
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