Amazon’s Leadership Change Signals Cloud-Centric Future

Jeff Bezos is joining an exclusive club of tech heavyweight founders that left the CEO position earlier than expected. Among the world’s most powerful tech companies — Amazon is currently the third-most valuable company in the world — only a few are still run by their founders. Jeff Bezos is joining an exclusive club of tech heavyweight founders that left the CEO position earlier than expected. Among the world’s most powerful tech companies — Amazon is currently the third-most valuable company in the world — only a few are still run by their founders. Bezos is leaving his role at a company he founded in 1994 after a year of massive growth. Amazon stock is up 89% from its 2020 low in mid March just as the COVID-19 crisis began to grip the world over. The company has a current market cap of $1.7 trillion. It surpassed a $1 trillion market cap in January 2020. By elevating Andy Jassy, the leader of Amazon’s cloud business, to run the entire company starting sometime this summer, Bezos indicated the critical nature and growing opportunity that Amazon Web Services (AWS) represents for the company at large. AWS generated 10% of Amazon’s total revenue in the fourth quarter of 2020 and accounted for nearly half of its profit during the quarter.  “Andy has been here since 1997. He is not only a visionary leader, he’s a strong operator … and he’s got a great track record of developing multiple things and businesses within Amazon, not the least of which is AWS, which is arguably the most profitable, important technology company in the world,” CFO Brian Olsavsky said on Amazon’s earnings call.  “Andy has a chance to put his imprint on Amazon. He is certainly going to carry through the culture and the vision, and the invention factory that Amazon is, and will take that to the next level,” he added. Reactions to the executive change and how it might impact AWS going forward are mixed, but overwhelmingly positive. Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy, tells SDxCentral he doesn’t expect any significant changes to AWS as a result of Jassy’s promotion. “I don’t think this move shifts the importance of focus versus Amazon’s retail and content operations. Jassy was at Amazon almost as long as Bezos and I believe [both of them] are cut from the same cloth,” Moorhead wrote in response to questions.  James McQuivey, VP and principal analyst at Forrester Research, addressed the unique timing of Amazon’s news and compared it to how other major tech companies have fared following leadership changes at the top. “Every founder, no matter how successful, must eventually hand over the reins, and Bezos has curiously chosen the middle of a pandemic to do it,” he wrote in response to questions.  The COVID-19 crisis might have delayed or hastened the move, but “either way, the goal is to avoid a handoff like when Bill Gates chose Steve Ballmer, who did not successfully transition Microsoft into a new era,” McQuivey said. “By choosing Andy Jassy, Bezos is potentially skipping the Ballmer transition phase and moving right into a Satya Nadella mode, turning to an expert in running a cloud business, someone who understands the long-term role that infrastructure and business services will play for Amazon, even as it tries to maintain its role as a consumer innovator.” Jassy’s promotion signals the importance of AWS as a profit driver for Amazon and the role cloud technology will play in fueling Amazon’s growth as a digital platform provider, Forrester Research VP Allen Bonde explained. “While consumer e-commerce is a big market, B2B is an even bigger prize. Picking a leader who is driving their main enterprise offering may indicate the future of Amazon is in fact selling more to businesses than consumers. In general, a much bigger prize in the long run,” Bonde wrote.  The leadership change will likely be a net positive for AWS and Amazon as a whole, according to Zeus Kerravala, founder and principal analyst at ZK Research. Placing the AWS chief in charge of all of Amazon places greater emphasis on the cloud business, he said.  “It’s the engine that powers the Amazon consumer experiences,” including online ordering, artificial intelligence (AI), and customer service systems built on AWS, Kerravala said. “Amazon is also often used as the best example of what’s possible with AWS.” AWS is “the defacto standard for cloud computing, largely because AWS was first and because AWS thinks customer first,” Kerravala said. Indeed, when AWS was first made commercially available in 2006 it was years ahead of its would-be competitors, and it’s maintained dominance over the public cloud computing space more than a decade after Microsoft and Google joined the market. “Microsoft and Google are getting better, but tend to think internally versus the customer. As long as AWS maintains the strong customer focus, I don’t see this being disruptive,” Kerravala said.  AWS remains the leader for infrastructure-as-a-service (IaaS) and it has increased its platform-as-a-service (PaaS) capabilities during the last five years, according to Moorhead. He expects AWS to lean more heavily into software-as-a-service (SaaS) and hybrid cloud offerings to strengthen its position and capitalize on opportunistic areas of growth.  One of AWS’ areas of focus, the distributed cloud, requires it to place more emphasis on edge computing and multi-cloud interoperability, Kerravala said. Cloud customers face significant challenges in normalizing services between clouds. “AWS security tools work great in AWS but not in Azure or Google Cloud Platform,” he explained “AWS should make this a priority as it would make them the control point for the distributed cloud,” and it could accelerate this via “small acquisitions” of companies like Alkira or Traceable, Kerravala said. The cloud giant could also increase efforts on its suite of communication and collaboration apps to break out of its minority position today, he added. Finally, Kerravala said AWS should continue to invest and develop tools fused with AI. “AWS has more data scientists than anyone so I expect them to do this in-house but there are some good acquisition targets” as well, he added.  Jassy’s elevation also, at least conceptually, puts to rest speculation about Amazon potentially spinning off AWS as a standalone company, and more importantly it’s not necessarily a path that Amazon needs to take any time soon, according to Kerravala and Moorhead.  Amazon hasn’t named Jassy’s successor, the future leader of AWS, but Matt Garman, VP of AWS sales and marketing, and Peter DeSantis, VP of AWS global infrastructure, are among the most likely internal candidates for the job, according to the analysts.