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Amazon Boosts the Ambitions of Its $7.3 Billion Cloud Services Business

So far, Amazon has offered mostly straight-up computing and storage services. Now it's getting into higher-value applications.

Amazon Web Services

For years, the cloud computing services unit of the Web retailer Amazon was something of a mystery: It was too small to be singled out in Amazon’s financial results but then, as it grew, it clearly became too important to ignore.

Since April, we’ve known that Amazon Web Services is on track to post about $7 billion in revenue this year, and that it boasts healthy profit margins of nearly 21 percent. Today it got specific: AWS will do $7.3 billion this year including $1 billion from its database service alone. It also has more than a million active customers.

Till now, the business has — broadly speaking — been built on leasing out relatively simple services: Computing horsepower and data storage space can be procured from AWS as easily and with a shorter wait than it takes to order practically anything from its online store.

Over time those services have gotten more complex, but today AWS kicked its service offerings up by several notches. At an event in Las Vegas, the company launched a cloud-based business application that will put it in more direct competition with companies as varied as Oracle and IBM, both of which have recently begun to revise their software offerings for consumption in the cloud.

One of the new Amazon services is Quicksight, a business intelligence service that aims to give companies the ability to build data simulations that will lead to new understanding that will either save them money or make more money by selling in new ways. In practice, business intelligence apps can be used to model “what if?” scenarios or to churn through historical data. Oracle, SAP and IBM as well as smaller companies like Tableau Software all offer BI applications.

By branching out into more complex kinds of applications, Amazon is matching IBM, which has in the last year or so migrated practically all of its existing software portfolio to run on its SoftLayer cloud service.

Amazon has before this shied away from offering applications as a service so this is a first, and likely a harbinger of things to come. If Amazon were to attract more customers spending more money for ever more complicated applications running on its cloud, that suggests that profit margins at AWS would rise. And already it is Amazon’s most profitable business unit.

But Amazon also offered several helping hands to potential customers with data stuck using older applications. One of those is Snowball. It’s a portable storage device into which a company can dump existing data and then ship it to Amazon, which can then upload it into AWS. The point is to speed up the time and reduce the effort required to import data into AWS so that it can be useful. A data migration that might have taken three months via a traditional upload over the Internet, even at top speeds, can now be done in a week or less, the company says.

One big target that Amazon did all but name today is Oracle, which makes database software and business applications to accompany it and which has lately shifted to offering them all as a cloud service.

If you’ve been watching AWS as it has grown over the last several years, none of Amazon’s moves today will come as a surprise. In an interview with Re/code last year, AWS head Andy Jassy talked openly about disrupting the established business plans of its longer-lived enterprise IT rivals, including Oracle and IBM.

Amazon’s customers, he said at the time, “voted with their workloads” and moved so quickly to AWS that the companies whose products and service they left behind were forced to adapt and were “frantically trying to build public clouds like AWS.” Now Amazon wants a bigger piece of the pie.

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