Most people know about Amazon’s ambitions to sell you everything from books and movies and smartphones to power tools and auto parts.
Less understood outside the technology industry is just how aggressively the company is also trying to become an important technology provider to other organizations, its aspirations just as big as those of Microsoft, IBM and Google.
Amazon Web Services already provides so-called cloud computing services at low prices for customers including the Central Intelligence Agency and Netflix. At a conference here last week for the web-services unit, company officials explained that Amazon was now trying to get more tech dollars from business customers by also offering services and processes that make it a competitor to traditional suppliers of business technology like Oracle.
Offering more capabilities to customers is a big deal for Amazon. A report last month by the Synergy Research Group said Amazon’s web-services unit has about a 27 percent share of the worldwide market for cloud infrastructure services. Microsoft is second with about a 10 percent share.
But there are indications that a pricing war and more focus from competitors could dig into Amazon’s lead. There are even concerns that the unit’s revenue growth has stalled in recent quarters.
What makes Amazon unique in the fight to own the computing cloud is what it’s not — a traditional tech company with a long history of providing products and services to business customers. Finding a way to deliver services over the Internet that behave like databases and other traditional software products will be critical to keeping its lead because older tech companies like Microsoft are already capable of doing it.
Amazon Web Services is banking on help from its customers to make its ambitions work. “Ninety percent of our development is deep, sophisticated corporate users telling us what to build next,” said Adam Selipsky, the unit’s vice president for products.
On Wednesday, the unit announced that in 2014 it had released 442 new products for its global network of computers and software, a 60 percent rise from all of 2013. It later raised that number to 449, including faster ways to write and publish software.
The lower number “was so this morning,” said James Hamilton, the enthusiastic executive who oversees the development of A.W.S. “This is a different world,” said Mr. Hamilton, a veteran of decades in companies like IBM and Microsoft before he joined the unit in 2008. “The speed is unbelievably different. We don’t slow down as we get bigger.”
But the unit could face challenges in its efforts. It has already had to deal with embarrassing system failures and changed its policies to suit national governments. Moreover, its parent company, Amazon, has returned less in profits in its 17-year life as a public company than cloud competitors like Google and Microsoft earn in a single quarter. If Wall Street grows tired of Amazon’s continued losses, it could also pinch A.W.S.
Amazon is not the only big tech company trying to lure businesses to the cloud. Microsoft, Google and IBM are all trying to get business customers to rent their cloud services rather than buy software, servers and networking gear.
Just a few years ago, public clouds like Amazon’s were considered experimental turf for tech start-ups. Today, companies like Johnson & Johnson, Intuit and General Electric are among the unit’s customers. In the past year, A.W.S. says, the amount of data it stores has grown 137 percent. It sells twice as much of its basic computing as a year ago.
And analysts believe the pace is picking up across the handful of big tech companies providing cloud services. “Two years ago, public clouds were maybe 2 percent of all computing workloads,” said Lydia Leong, a senior analyst at Gartner. “Now they are more than 10 percent. By 2018, it will be more than 50 percent.”
In addition to parading mainstream companies across the stage at its conference, Amazon released a type of database aimed straight at the core business of Oracle, the world’s largest database company. Oracle declined to comment on Amazon Web Services.
Johnson & Johnson announced from the stage that it would install 25,000 cloud-connected A.W.S. computers that offer a range of standard software, like Microsoft’s Office suite.
Mr. Selipsky said J&J had helped Amazon shape its desktop product, which was initially announced a year ago. Although A.W.S. is known mostly for selling basic computing services, he said that future products would include sophisticated software around managing user behavior, software for compliance in regulated industries like finance and migration of existing software running on corporate computers to the cloud.
By running the customers’ software within their own data centers and listening closely to their needs, cloud companies learn more quickly about customer behavior, figuring out which incremental improvement they can immediately deploy across their networks. And then they can turn around and give those customers exactly what they want.
At least, that’s what the cloud tech companies like to argue.
“The cloud is cheaper, but that isn’t really what is driving companies into it,” said Greg De
Michillie, the director of Google’s cloud business for corporations. “They want to be more experimental, faster, data driven. This is part of a larger change inside companies.”
Authored by Quentin Hardy via nighttime.com.
It happened many weeks ago, but salesmen at a suburban AT&T store here still vividly recall the customer who bought an Amazon Fire phone.
They remember her because they haven’t sold another Fire since.
Professional reviews of the phone were mixed, but the ultimate arbiters — consumers — decisively rejected it. At many companies, such an expensive and high-profile stumble would prompt endless analysis, a deflated stock and perhaps even questions about whether management was up to the task.
But Amazon is not like other companies.
Amazon’s shares have not suffered much, if at all, from the Fire’s failure. Nor is the phone likely to dominate analysts’ questions when Amazon releases its third-quarter earnings Thursday afternoon.
The phone is in the past, and Amazon is above all a story about the future, about the glorious moment when the e-commerce giant will sell everything, whether electronic or digital, to everybody. And so the focus in the earnings report will be on Amazon’s huge investments in trying to make that moment come true.
In this scenario, Amazon will commission TV series and beam them to you to watch on Amazon devices, as you nibble on popcorn delivered by Amazon drones while choosing your next vacation from the Amazon ad network.
Building an Amazon-centric world takes money, lots of it. The company announced over the summer that it would invest $2 billion in India’s fledging e-commerce market. And it paid $1 billion in cash for Twitch, a game-streaming site that did not exist three years ago.
Even with Amazon likely to hit $100 billion a year in revenue in 2015, it is not throwing off all the cash it needs. Last month the company revealed it had taken out a $2 billion line of credit with Bank of America for “working capital, capital expenditures, acquisitions and other corporate purposes.”
Meanwhile, losses are mounting. Three months ago, analysts thought the company would lose 7 cents a share in the third quarter. Then, after Amazon ratcheted down expectations, the estimated loss swelled tenfold, to 74 cents.
It is getting to be a familiar story. The last time Amazon made a profit in the third quarter was in 2011.
Other media companies look at Amazon with a certain wonderment. “My report card is based on profits,” the CBS chief Les Moonves said at a conference last summer. “I think Jeff Bezos has a much easier way of life than I do.”
Analysts are generally enthusiastic. Cowen and Company said this week that it expected Amazon to lose “only” 57 cents a share. Colin Gillis of BGC Partners, usually somewhat skeptical of Amazon, issued an upbeat note that focused on the potential of the company to use its various hardware for an advertising network.
“We are actually mildly positive on the potential of the current investment cycle as Amazon builds an ecosystem with its Kindle readers (success), tablets (mild success), App store (mild success), Fire TV (limited traction but a good product) and phone (failure, priced too high and limited distribution),” Mr. Gillis wrote. He noted that the retailer knows where its tens of millions of customers live, what they like and how they consume.
Michael Pachter of Wedbush Securities was a mild dissenter, citing “a variety of customer experience enhancements” that will soak up potential profits. These enhancements include a streaming music service recently introduced by Amazon. It is free for Amazon Prime shipping members.
Content spending on video and music will total $2 billion this year and $2.5 billion next year, Mr. Pachter wrote.
Free things make enrolling in Prime more attractive, and that inspires people to buy more, which is how Amazon is really expected to make money. But not soon. Analysts see a loss for 2014 before a profit of $1.91 a share in 2015, according to Yahoo Finance.
Unless there are unexpected bumps. Amazon, in keeping with its usual reticence, does not break out numbers for Amazon Web Services, its cloud service. Instead it lumps it into a category called “other.”
For the last two quarters, “other” growth abruptly leveled off. Amazon was the pioneer in cloud computing, but it faces increased competition from Google and Microsoft, both of which have deeper pockets. Microsoft said its commercial cloud revenue has doubled year-over-year for the last four quarters.
Amazon stressed in a news release in July that it was frantically hiring for Amazon Web Services, “allowing the team to innovate at an accelerating pace.”
The Fire phone will need some serious innovation to become even an acceptable product. A marketing survey of 500 Amazon customers in the third quarter could not find any who reported owning a Fire. Meanwhile, the majority of the reviews on Amazon’s own site give the Fire the lowest possible rating.
A $200 price cut last month briefly pushed it up on Amazon’s list of top-selling electronics, but it quickly fell off again.
Authored by David Steitfeld via nytimes.com.
Correction: October 23, 2014
An earlier version of this article misstated the cash price that Amazon paid for the game-streaming site Twitch. Amazon paid $1 billion in cash for Twitch, not $1.1 billion in cash ($1.1 billion was the total value of the deal).
With each corporate cloud computing proposition, including those from the likes of Google, whose Oregon data center is seen here, there appears to be an increasing trend toward offering more flexible applications driven by software.Credit Connie Zhou/Google
Cloud computing isn’t merely changing the way much of the technology business works. Now it is changing itself, and putting even more computing power in more places.
On Monday, Microsoft, which operates one of the biggest so-called “public clouds,” or large and flexible computing systems available for remote rental, announced several changes to its data storage and processing services that will make them more powerful.
Microsoft also announced a partnership with Dell to sell a kind of “cloud in a box,” or hardware and software that created a mini-version of Microsoft’s cloud, called Azure, inside a company.
The idea is that a company could work with its own version of Azure, then easily move up to the giant version Microsoft has to handle big workloads. Hewlett-Packard may be after something similar with its effort to create a private-public cloud business based on the HP cloud, which uses a kind of open source software.
What all of this means is that cloud computing, which makes it easier to tie more things to computers and more easily manage software, is starting to appear in even more forms and types. Within each corporate proposition, including Google and Amazon, as well as Microsoft, HP and others, there appears to be an increasing trend toward offering more flexibility. Generally it’s done by abstracting what were functions of specialized hardware into more easily altered software.
Microsoft’s announcements this week came after the news last week that it would offer Windows Server technology on Docker, a fast-moving open source project (and start-up company of the same name) that takes cloud-type software abstractions even farther. Docker’s so-called “containers,” which were previously available on the Linux operating system, make it possible to build, deploy and update a software application anywhere in the world.
Adding to this confusing paradise of computing power, flexibility, and global software deployment, on Wednesday a company called Bracket Computingannounced that it had a technology that makes it possible to run high-performance corporate computing systems across several public clouds at the same time.
While it now works only with different geographic locations inside the global cloud of Amazon Web Services, Bracket hopes eventually to enable companies to securely manage their computing across several public clouds at once. This kind of brokering, if successful, could mean further competition among the public clouds, either on price or service.
People who had worked with the Bracket System were impressed. “Even just with A.W.S., this is powerful,” said Frank Palase, senior vice president of strategy at DirectTV. “Abstracting over several cloud providers would mean we could have high levels of performance with no fear of outages,” since one system could be brought up if another failed.
It’s also possible that Bracket’s Computing Cell could hold containers, like Docker, inside its system.
For all the new terminology and hand-waving around these developments, at least one thing is clear: The cheap and easy cloud is also catching up in areas like reliability and management ease, where it has been criticized. Like all big computing trends, it has started rough, but it appears to be stabilizing and getting bigger.
Authored by Quentin Hardy via nytimes.com.
Apple's launch of the larger screen iPhone 6 and preview of iWatch or a similar wearable will aim to silence critics who contend the company's innovation has peaked, but may also transform the business model.
While Apple's powwow Tuesday will kick off the company's "Fab Fall" series of product launches — 4.7-inch and 5.5-inch large screen iPhone 6 devices, a wearable and talk about the company's technology direction going forward. The sequel from Apple will revolve around the iPad and what analysts hope is an iTV.
The launches will set Apple up for the next few years and could fundamentally transform how the company makes money. Today, Apple is mostly a hardware company — even though app and music revenue tops $10 billion annually. In the future, Apple will have to be more about software and services.
With more than half its revenue deriving from the iPhone, Apple will have to diversify elsewhere. This product cycle from Apple will go along way to diversifying sales.
Here's a look at five ways Apple's model could shift:
Larger screen devices, more valuable apps? Larger iPhones could result in more high-value applications as well as revenue growth for Apple's software business. Should Apple's selection of apps move into analytics, enterprise and running companies revenue will follow.
Macquarie analyst Ben Schachter said:
"With the iPhone 6’s bigger screens, faster speeds, NFC, and better sensors, it is rational to expect significantly more utility from a broad variety of apps. And given that Apple was able to sell $10 billion of apps in 2013, 75 percent plus of which were relatively simple games on relatively small screens, we think the new hardware and sensors will enable much better software and services that should drive growth."
Apple will garner more revenue from the enterprise. Another thread to the launch of big-screen iPhone 6 devices is Apple's partnership with IBM. As noted previously, larger iPhone screens are going to appeal to the enterprise. Over time, Apple's business could look as strong as BlackBerry's did at its peak.
Ads. Apple has reportedly clued in fashion mavens about its wearable plans. Apple has also started an ad business, but hasn't really pushed it. Coverage from desktops to tablets to phablets to phones to TVs and watches should enable Apple to offer programs that would appeal to marketers. Amazon has quietly become a big advertising player. Any ability to move the needle on advertising could diversify Apple's revenue base.
Authored by Larry Dignan via zdnet.com.
ROUND POND, Me. — Out here in the woods, at the end of not one but two dirt roads, in a shack equipped with a picture of the Dalai Lama, a high-speed data line and a copy of Thoreau’s “Civil Disobedience,” Amazon’s dream of dominating the publishing world has run into some trouble.
Douglas Preston, who summers in this coastal hamlet, is a best-selling writer — or was, until Amazon decided to discourage readers from buying books from his publisher, Hachette, as a way of pressuring it into giving Amazon a better deal on e-books. So he wrote an open letter to his readers asking them to contact Jeff Bezos, Amazon’s chief executive, demanding that Amazon stop using writers as hostages in its negotiations.
The letter, composed in the shack, spread through the literary community. As of earlier this week 909 writers had signed on, including household names like John Grisham and Stephen King. It is scheduled to run as a full-page ad in The New York Times this Sunday.
Amazon, unsettled by the actions of a group that used to be among its biggest fans, is responding by attacking Mr. Preston, calling the 58-year-old thriller writer “entitled” and “an opportunist,” while simultaneously trying to woo him and his fellow dissenters into silence.
Mr. Preston has dismissed Amazon’s suggestions that he is a “human shield” for Hachette. Credit Craig Dilger for The New York TimesMr. Preston is unswayed.
“Jeff Bezos used books as the cutting edge to help sell everything from computer cables to lawn mowers, and what a good idea that was,” he said. “Now Amazon has turned its back on us. Don’t they value us more than that? Don’t they feel any loyalty? That’s why authors are mad.”
This latest uproar in Amazon’s three-month public battle with Hachette comes at a vulnerable moment for the Internet giant, which is rapidly transforming itself into an empire that not only sells culture but creates it, too.
Amazon does not want to be seen as hostile to content creators, one of the four groups it says on its investor relations web page it is expressly set up to serve. But it also has to price their creations cheaply enough to draw hordes of consumers, while at the same time making enough of a profit to satisfy investors.
It is a complicated balancing act. Some argue it is impossible. Amazon just surprised Wall Street by saying it may lose more than $800 million this quarter, potentially wiping out its profits for the last three years, partly because creating video content is expensive. The prospect of this unexpected loss has raised questions about whether Amazon’s money-losing ways are finally catching up with it — and whether that is the real reason it is making new demands on publishers like Hachette.
Amazon has been forced by the controversy to shed its longtime practice of refusing to comment on anything. Asked about the writers’ rebellion, it issued a statement that put the focus back on Hachette, bringing up the Justice Department’s antitrust lawsuit against Hachette and other publishers in 2012: “First, Hachette was willing to break the law to get higher e-book prices, and now they’re determined to keep their own authors in the line of fire in order to achieve that same end. Amazon has made three separate proposals to take authors out of the middle, all of which Hachette has quickly dismissed.”
Mr. Preston pointed out it was Amazon that put the authors in the line of fire in the first place. Russell Grandinetti, Amazon’s vice president for e-books, has called Mr. Preston twice in recent weeks, trying to get him to endorse the company’s proposals to settle the dispute, as well as to pipe down. The most recent proposal would have Amazon selling Hachette books again, but with Hachette and Amazon giving their proceeds to charity.
No thanks, Mr. Preston said. A proposal that weakens Hachette by cutting its profits was not in the interests of Hachette’s authors. But he took the opportunity to ask Mr. Grandinetti why Amazon was squeezing the writers in the first place.
His response, according to Mr. Preston: “This was the only leverage we had.” Amazon declined to comment.
“It’s like talking to a 5-year-old,” Mr. Preston said. “ ‘She made me hit her!’ No one is making Amazon do anything.”
No one is making Mr. Preston do anything, either. He dismisses Amazon’s suggestions that he is a “human shield” for Hachette, one of the Big 5 publishers in the United States. He and the other writers say they are acting independently. Most, in any case, are not published by Hachette.
Mr. Preston is not sure how he has found himself in charge of a group calling itself Authors United. “I don’t like fighting,” he said. “I’m a wimp. When the bullies in seventh grade said they would meet me in the parking lot after school, I made sure I was nowhere near it.”
Other writers who signed the letter include Robert A. Caro, Junot Díaz, Malcolm Gladwell, Lemony Snicket (the pen name of Daniel Handler), Michael Chabon, Michael Lewis, Jon Krakauer, Scott Turow, George Saunders, Sebastian Junger, Philip Pullman and Nora Roberts.
“We feel strongly that no bookseller should block the sale of books or otherwise prevent or discourage customers from ordering or receiving the books they want,” the letter states.
Some writers wholeheartedly supported the letter but were afraid to sign, Mr. Preston said. A few signed it and then backed out, citing the same reason. The Times ad, which cost $104,000, was paid for by a handful of the more successful writers.
Mr. Preston’s longtime writing partner, Lincoln Child, is among those with qualms.
Authored by David Streitfeld via nytimes.com.