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How AWS achieved 58% growth in revenue

Amazon web services
Meaghan McGrath, analyst at TBR, while analyzing the revenue of Amazon Web Services (AWS) during Q2 2016, said the technology company expects usage to continue to scale in line with rapid data center expansion.

Amazon executives minimized the prepared remarks portion of the company’s Q2 2016 earnings call, but did note that Amazon Web Services’ (AWS) 58 percent growth to almost $2.9 billion was supported by continued operating efficiencies that enabled the business to reach $718 million in operating profit with an operating margin of almost 25 percent.

Further, Amazon executives do not expect a negative impact on operating efficiency as adoption scales in step with the nine availability zones across four more regions that will open over the next year, in addition to the just-launched Asia Pacific (Mumbai) Region.

AWS is comfortable in its leading position, confident in its ability to sustain its pace of innovation that it touts as a differentiator. However, there increasingly competitive vendors and hybrid cloud acceptance by customers that will challenge the share of that AWS continues to win. TBR expect that AWS revenue growth will maintain its high-but-slightly-decelerating pace, even as AWS rapid expands its capacity and global reach, due to revenue base scaling, service price reductions, and increased competitiveness in more engagements.

Improved migration services helps AWS poaching customers in transition to cloud

Not only does AWS face competition from other cloud vendors, but the business also lacks its own legacy install base of customers that can support growth by being transitioned to cloud alternatives, like Oracle, Microsoft, and IBM. While these legacy vendors work to retain their customers in transition, AWS conversely adapts its customer engagement efforts and must articulate a clear migration path from each competitors’ legacy solutions to AWS, in order to convert customers to AWS’ alternative cloud services.

AWS has added to its migration services to make it even easier to for customers to migrate from legacy solutions to AWS. These updates include the addition of AWS Migration Competency to its Competency Program, the AWS Application Discovery Service, a new feature to accelerate Amazon S3 data transfer and a larger Snowball appliance that will be available in more regions. These added features aim to entice potential AWS customers to migrate to AWS from their current legacy solutions.

As more customers evaluate moving part or all of their workloads to cloud, there is an increased need for third-party service providers to support large-scale workload migration. The AWS Migration Competency helps customers easily identify which APN Partners are best equipped to support them with proven migration success and technical proficiency. During these evaluations it is also critical to fully understand the legacy environment being altered, which AWS supports with the new Application Discovery Service that helps customers discover and plan for unique migration complexities of applications from legacy environments to AWS cloud. Further, AWS aims to support easier data migration by accelerating and simplifying the process with accelerated Amazon S3 data transfer that utilizing the AWS edge infrastructure and optimized network protocols, as well as expanded Snowball unit capacity and availability.

AWS empowers more ISVs to drive more IaaS revenue through its marketplace

Independent Software Vendors (ISVs) are vital in extending AWS’ cloud offerings and global reach. While AWS’ Marketplace consists of more than 2,700 offerings from 925 ISVs, the business opened product registration to European Union-based ISVs, even if the ISV does not have a U.S.-based entity.

The update will expand the AWS Marketplace by allowing smaller EU-based ISVs the opportunity to make their product available to a larger customer base, and will help drive even more AWS IaaS usage through the marketplace. Further expanding ISV opportunity, the United States Intelligence Community has chosen to expand upon its unique AWS usage by building a dedicated marketplace to accommodate their unique needs. This will add opportunities for certain ISVs to more effectively penetrate the public sector and make government contract negotiations more efficient.

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