Andy Jassy’s Climb to Amazon CEO shows the rising power of the cloud

The battle for the cloud takes place in a variety of industries – from video games to cars to space – and in businesses large and small.

For Amazon, cloud computing has been a thriving business that is hugely lucrative. Amazon Web Services, or AWS, generated just over 10% of Amazon’s total sales in the last quarter of last year, but generated more than half of its operating profit during that period. AWS revenues were up 28% over those three months from the year before, to $ 12.7 billion, and operating profit was $ 3.6 billion.

For executives, the cloud is increasingly becoming a springboard on the corporate ladder. Microsoft CEO Satya Nadella led the software giant’s cloud business before hitting the top job in 2014. International business machines Corp.

last year turned to his cloud chief when it came to appointing a new CEO to revive growth.

The appointment of Mr. Jassy – replacing Amazon founder Jeff Bezos as CEO in the third quarter – is especially notable as Mr. Jassy is acquiring not only a technology company but also one of the world’s largest retailers.

“This shows how important the cloud is to our economy,” said Rishi Jaluria, an analyst for investment research firm DA Davidson & Co. “With Andy Jassy in charge of all of Amazon, it shows how the company that DNA is at the heart of AWS for all of Amazon.”

The wide range of tools now offered by Amazon and others through the cloud has exploded as companies across various industries collect more data about their products, customers and employees. Cloud providers now offer applications to help manage and analyze that wealth of information, for example, increasingly using artificial intelligence software to automate processes.

Investors are increasingly rewarding companies that have embraced cloud computing, and they have gotten a bleak picture of those struggling to adapt.

Snowflake Inc.,

a company that offers tools to help companies manage their data across multiple clouds went public in a blockbuster last year. Shares are up about 18% since their debut from their December high. Data analysis startup Databricks Inc. recently raised $ 1 billion, giving the San Francisco-based company a valuation of $ 28 billion. Salesforce.com Inc.,

Launched more than 20 years ago as a cloud-based software company, has grown into one of America’s largest providers of business tools and has used its increasing fortune to fund deals, including an agreement late last year to purchase cloud-based workplace collaboration software vendor Slack Technologies Inc.

Companies that have been slow to embrace the cloud are trying to catch up. Larry Ellison, the founder and executive chairman of database provider Oracle Corp.

, once dismissed cloud computing as a fad. In recent years, Oracle has ramped up its cloud computing efforts and poached AWS staff. Mr. Ellison now regularly trumpets the company’s cloud exploits on revenue calls and last year the popular video conferencing company Zoom Video Communications landed Inc.

as a cloud client to polish Oracle credentials.

At the beginning of the pandemic, when US companies were hanging, the multi-year growth in cloud spending seemed in danger. Salesforce lowered its full-year outlook as it offered some troubled customers a payment vacation. IBM withdrew its annual supervision in April.

But reality played out differently. The pandemic has boosted the cloud as companies rushed to use tools to help them cope with remote work and other challenges during the health crisis. Microsoft’s pre-pandemic Azure cloud had seen slower growth as it grew. That has been reversed in recent months. Azure sales were up 50% year-on-year in the December quarter, compared to 48% in the previous quarter.

“What we’ve seen in the past year is the dawn of a second wave of digital transformation that is engulfing every company and industry,” said Nadella last month.

Amazon is clearly the leader in the cloud by sales, although companies differ in the way they calculate the revenue generated by those activities. According to Synergy Research Group, AWS had a market share of approximately 34% at the end of last year. Microsoft was second with a 20% segment, but has narrowed the gap, according to Synergy Research.

Amazon’s rise in the cloud has not been without its challenges. In addition to increased competition, there are also retailers, such as Walmart Inc.

—They are avoiding AWS and working with rivals out of concern to give Amazon more business and power.

The cloud is also increasingly becoming a political minefield as it becomes more central to everyday life. Amazon was caught last month in the fraught question of what content to allow or block on its platform. AWS kicked conservative social network Parler out of the cloud, saying the customer was not adequately monitoring content and failed to remove content that violated Amazon’s terms of service. Parler is suing Amazon for the action.

When a House panel released a report last year on antitrust issues surrounding major technology companies, it said AWS provides the core infrastructure for companies competing with Amazon. “This creates the potential for a conflict of interest where cloud customers are forced to consider patronizing a competitor, rather than selecting the best technology for their business,” the committee wrote. Amazon has said it is not using AWS to favor its retail arm.

Amazon also caught the attention of lawmakers when a former employee was arrested in 2019 for orchestrating the Capital One Financial hack Corp.

Write to Aaron Tilley at [email protected]