clock menu more-arrow no yes

Amazon Cloud Chief Andy Jassy Dismisses Talk of Price War

Forty-five price cuts from Amazon suggest it's not the one being hurt by competition.

Headshot of Amazon Web Services CEO Andy Jassy. Courtesy Amazon

It’s not yet noon on a busy Wednesday in Midtown Manhattan, and Andy Jassy, the head of Amazon Web Services — the retail giant’s cloud computing unit — wants a hot dog.

Based in Seattle, the Westchester County native considers himself a hot dog connoisseur and can’t resist the chance to chow down on a couple of foot-longs purchased from a sidewalk vendor situated just outside Amazon’s offices on Sixth Avenue. (Mustard only.)

He eats quickly, because he’s late for his next meeting and has just spent more than an hour in a wide-ranging interview with Re/code talking about AWS and the state of the cloud-computing business. AWS is now eight years old, and its success has made it a juicy target for many would-be competitors.

Last year, IBM spent $2 billion to acquire SoftLayer and has made no secret of its intention to build a cloud bigger than Amazon’s. Indeed, IBM has argued, somewhat dubiously, that its cloud already is bigger.

Then there’s Google, also seeking to use its massive global footprint of computing infrastructure to bulldoze its way into the cloud-computing business. Plus Microsoft’s Azure, Rackspace and Hewlett-Packard’s Helion, to name a few others that are gunning for AWS in some way.

Jassy, whose title is Senior VP for Web Services, will be speaking later today at an Amazon event in Las Vegas, and his speech is expected to set the table for the coming year at AWS.

There have been reports that competitors are starting to make inroads against AWS, or are at least, as The Information noted recently, getting a second look from some big customers. This has coincided with chatter about a brewing price war that can’t help but hurt everyone participating in the marketplace. It was the first thing I asked Jassy about:

We read a lot these days about a price war breaking out for cloud computing services, and the narrative usually leads to the conclusion that eventually it’s going to hurt the biggest player in the market, and that’s you. So what do you think: Is there a price war?

Andy Jassy: You know, I don’t really know what a price war means in this context. And I’m not trying to be coy about it. It’s just — to me, if you look at the history of AWS, prices have come down very consistently, [on] something like 45 different occasions in the last eight years. And they’ve come down largely in the absence of any competitive pressure to do so, so we don’t do it for show. And we don’t do it to try to create attention for ourselves. And we don’t jump up and down the same way about it. …

Whenever we’re able to create efficiencies in our cost structure, instead of pocketing that as savings, we just give them back to customers in the form of lower prices. So that’s why we have very consistently taken our prices down. And I expect that to continue. …

So is it a price war? I mean, I know that’s a very interesting angle for stories in the press. And I know the press has been very excited about it. We just don’t think of it that way because we’ve always believed that pricing is going to continue to come down.

What about the recent report that a significant AWS customer, Dropbox, may have contemplated adding some capacity from Google to its infrastructure?

As I’m sure you can appreciate, we don’t talk about the details of our customer relationships. But Dropbox has been a very substantial AWS customer for a long time and continues to be. From the very start, they had some of their own servers and used AWS. And their AWS usage has continued to grow very substantially. And our team is very passionate about servicing Dropbox. Their business not only has grown over the last year on AWS, but I think the relationship is deepening.

You have many substantial customers, and from all indications AWS is, within Amazon, a pretty substantial business. Educated guesses say it brings about $5 billion a year. But you won’t disclose how big it actually is. When might that change?

Believe me, it would make my life easier if I could answer that. All I can tell you is that we’re really pleased with where the AWS business is financially.

You’ve been at this now for eight years or so. What, in your view, has changed about the cloud business over the years?

Two or three years ago, there were some enterprises that appreciated the impact that cloud could have on their business. Some were moving very aggressively to cloud. And some were moving tentatively to the cloud, but were moving. And then there were a number of enterprises where the conversation was really an “if” conversation, as in, “If I ever moved to the cloud, how would I do X and Y and Z?” Today, we don’t really have those “if” conversations anymore. These are all “when” conversations.

And many of the other vendors — IBM, Hewlett-Packard, Oracle — are quick to talk about their hybrid-cloud approach, where customers mix their own equipment with cloud services. What do you think of that approach?

If you name all those companies, they all have pretty significant businesses that are not the cloud, and what AWS does is very disruptive for them. I think it’s why you saw all those same companies pushing the private cloud so hard the first six years that we were ramping up AWS — because the private cloud maintains all those high profit margins on hardware and isn’t disruptive to their traditional business. … Customers voted with their workloads and continued to move very quickly to AWS. All of those same companies who really pooh-poohed the public cloud and pushed the private cloud are now frantically trying to build public clouds kind of like AWS.

This article originally appeared on Recode.net.