Stephen E. Arnold: Is Amazon the New Enron?

Commercial Intelligence
Stephen E. Arnold
Stephen E. Arnold

The Amazon Cloud: From Objects to an “Incredible Figure”

I suppose rural Kentucky is no bellwether for the economic micro climates in which Amazon, Google, eBay, Facebook, and a handful of other companies operate. The big news in Kentucky is General Electric’s rumored sale of the sprawling Appliance Park. The “park” is a misnomer or one of those business euphemisms for acres of concrete and low cost industrial structures popular in the Rust Belt for many years.

I read “Amazon’s Cloud Is One of the Fastest-Growing Software Businesses in History.” I though about euphemisms because when my team and I wrote an analysis of the issues Amazon faced by using certain parts of infrastructure as a way to reduce the costs of online infrastructure, Amazon did not provide verifiable financial data. I had to look at fuzzies like “objects.”

The $5 billion figure in the Businessweek story arrested my attention. The transition from objects to dollars was quick. Even the MBA must read (which is on the shopping block) had the temerity to write:

If true, it’s an incredible figure.

Here’s another statement based on data from an allegedly objective source, Pacific Crest Securities:

The growth of Amazon’s cloud business is unprecedented, at least when compared to other business software ventures. It’s grown faster after hitting the $1 billion revenue mark than Microsoft, Oracle, and Salesforce.com.

That is indeed impressive. Businessweek notes:

You would need to turn to Google (GOOG)—which had the advantage of the vast consumer market—to find a business that grew faster.

The point not mentioned in the Businessweek analysis is that the fact that Amazon is not Google may be powering Amazon’s openness about the stunning and incredible size of its cloud business. For now, Google, not Amazon, holds the number one spot on many Internet Top 10 listicles.

Based on the research we have conducted about Amazon, I am hopeful that Amazon will provide similarly concrete information about:

  • Ownership stakes in companies using Amazon cloud services and how discounts and invoicing and payments work
  • Cost detail about the online infrastructure; telco, hardware, software, and human engineers (FTE and rentals)
  • How Amazon’s core services operate on the online infrastructure at times of peak demand; that is, does “peak” mean something different among class/type of cloud customer and Amazon’s core services

At the root of my question is how a push for infrastructure optimization has morphed into the “incredible figure”? More to the point, is the $5 billion real or collection of financial procedures to keep Amazon’s costs from poking through Amazon’s revenue line?

Stephen E Arnold, November 7, 2014