Amazon will go out of business ... if we stop innovating: AWS CTO
By Lum Ka Kay with additional reporting from Goh Thean Eu May 3, 2016
- AWS set to reach US$10bil in annual revenue this year
- But disruption can come from anywhere, says its CTO
[NOTE: The headline and second paragraph of this story have been corrected to more accurately report what was said. We apologise for the error]
ALTHOUGH there are no signs of Amazon Web Services (AWS) slowing down, its chief technology officer Dr Werner Vogels (pic above) remains constantly on his toes.
“Amazon.com will go out of business in 10 years if we stop innovating … in the digital world, competition is always around the corner,” he tells Digital News Asia (DNA) in an exclusive interview in Petaling Jaya recently.
AWS, the cloud computing services business unit of US online retail giant Amazon.com, has been one of the main drivers of its parent’s strong financial performance.
For the first quarter ended March 31, 2016, AWS posted revenue of US$2.57 billion (a 64% year-on-year increase), while operating income jumped by 210% to US$604 million.
For the full year ended Dec 31, 2015, AWS recorded US$7.88 billion in revenue, a 70% increase from the US$4.64 billion in 2014.
With such a strong Q1 performance, AWS is on track to hitting the US$10-billion revenue target set by Amazon.com chief executive officer Jeff Bezos.
At the group level, Amazon.com’s net sales rose 28% to US$29.13 billion, while operating income jumped 320% to US$1.07 billion. Its market capitalisation today is more than US$300 billion.
The secret sauce
Despite this set of impressive numbers, Vogels believe Amazon.com and AWS could lose their leadership positions if they were to become complacent and stopped innovating.
And disruption would most likely come from the smaller-sized players, not other tech giants.
“There are those which specialise in selling shoes, and those which specialise in selling clothes, and customers know exactly where to get the best deal, the best information, and the best customer support,” says Vogels.
“Hence for us, if we stopped innovating, it would be death by a thousand cuts,” he adds.
Today, AWS is by far the largest cloud service provider in the world. A Synergy Research report found that it is bigger than its four biggest rivals combined.
So what is the secret of its success? Besides innovation, the company spends a lot of time understanding what its customers want, Vogels declares.
In fact these days, even though the company has a sizeable lead in the market, he says he is still disturbed whenever he learns that a customer is choosing another provider.
“The only thing I do think about sometimes is why that customer picked that other service provider instead of us,” he says.
“Is it because its friends are there? You need to know that, because if the problem lies with us, it means we have things to fix.
“Competitor-following might be a business strategy for others, but not for us,” he says.
Last year, AWS launched 722 new features. Vogels says that these launches were only made possible through close collaboration with its customers.
“We really listen to our customers – what they have to say and what their pain points are.
“I think if we stop doing that, we would lose the advantage that we have really quickly. We will still have our big business, but customers will start looking for others who will listen to them.
“Listening to our customers sits in the DNA (deoxyribonucleic acid) of AWS,” he declares.
Amazon.com’s motto is to be the most customer-centric company in the world. The same applies to AWS as well, Vogel says.
Next Page: Cut from the same cloth, according to Bezos