It’s rumoured that Amazon is not making any money out of its enterprise cloud computing offering.
However, cloud management platform Abiquo says it looks like Amazon is instead reinvesting heavily rather than returning dividends to shareholders.
Amazon is aiming to take a bigger bite out of the enterprise market with Amazon Web Services (AWS).
Speaking at the 2013 CRN Channel Conference, Abiquo’s VP of products Ian Finlay said: "We’ve heard those rumours too. It look like they’re making profit from AWS, but are reinvesting heavily rather than returning dividends to shareholders. Managed Service Providers need to look at how they can use Amazon’s services as part of their offering, rather than going head-to-head."
PCR asked Ian where this rumour may have stemmed from, and he said much of it is from Amazon themselves.
This year, Jeff Bezos, Amazon’s CEO, said in a letter to shareholders: "Our heavy investments in Prime, AWS, Kindle, digital media, and customer experience in general strike some as too generous, shareholder indifferent, or even at odds with being a for-profit company".
Furthermore, Amazon competitor Profitbricks calculated that Amazon’s margins on cloud services are over 80 per cent.
Finlay added: "Putting these together, it looks like Amazon is doing well from AWS, but reinvests all the profits in new and better services, while the rest of the market risks a race to the bottom in an attempt to take on Amazon directly.
"The question for the channel, and for more niche MSPs, is how can they compete with this? Abiquo’s answer is that they don’t need to, and that they can help them to leverage Amazon’s investment, add their own services to it, and take it to their own market."
Other managed service/IT experts spoke at the conference, including The 2112 Group’s Larry Walsh, who said that ‘US managed service providers are killing themselves’.