DesignMind Featured in The Daily Upside | September15, 2024

In the age of AI, computing power is as good as gold. And that makes Amazon as rich as Croesus. 

Amazon Web Services, or AWS, has long dominated the cloud services market, holding a large lead over the likes of its main competitors, Microsoft Azure and Google Cloud. Though the company had a first-mover advantage in the beginning, experts told The Daily Upside that its reliability, easy-to-use systems, and sticky ecosystem have kept it in the lead. 

And with AI’s reliance on the resources and ecosystem that cloud service providers offer, the tech is only poised to grow. Usurping AWS would necessitate a monumental shift in the cloud service market — and the tech industry at large. 

“There are three big [cloud] companies, but Amazon’s probably always going to be one of them,” said Trevor Morgan, senior vice president of operations at OpenDrives. “And always being on the short list — that’s a pretty desirable place to be.” 

We’re talking about a cloud business that brought in $90 billion in 2023 and drove more than 15% of Amazon’s revenue. It’s poised to break $100 billion this year. Whole Foods would have to sell a lot of organic kale to rival results like that.

‘Its Own Customer’

Amazon’s cloud dominance began like a lot of innovation does: from a need to solve its own problems. In the early days of building its e-commerce empire, the company constantly faced the tedious and expensive issue of managing IT infrastructure. AWS was the product of reimagining that infrastructure entirely. Fixing that problem for its internal needs allowed the company to come to “much more fruitful solutions” than it would have from the outside looking in, said Morgan.

“Amazon was its own customer,” said Morgan. “Yes, that problem was everywhere, but they didn’t identify it out in the market. They identified it, proved it out, and then proved out that this was truly a marketable idea.” 

Officially launching in 2006, the company had several years before any other tech firms started to notice that the need for off-site computing resources was, in fact, a problem, said Irusha Peiris, analyst at William O’Neil. “No one really took [cloud services] seriously,” said Peiris. “And [Amazon] had come up with an incredible solution that appealed to not just big businesses, but every business.” 

In that time, the company had a lead in developing relationships with customers, said Peiris — and getting that lead may have cemented its fate. Even if other providers offered similar service at cheaper prices, the “switching costs” of moving from one cloud provider to another are significant, he said. “Even if something might be a little bit better and might be a little bit cheaper, it just might be too much effort,” he said. 

But it’s more than just loyalty that keeps AWS in the lead. At its core, Amazon’s good at making products that are “available and quickly consumable,” said Morgan, a habit learned from its e-commerce roots. “Amazon gets that — that’s part of their DNA.” 

The company’s services are easily configurable and scalable based on individual needs, almost like “Lego blocks,” said Connie Yang, principal of AI and data science at DesignMind. “You start out with the compute, and then you can just build it however you want to. It’s the configurable nature of AWS that makes it preferable to technical folks.” 

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