Wednesday, April 22, 2015

Amazon Web Services Knows What It Is Doing

 “Can You Say What Your Strategy Is?” teaches us the importance of having a clearly defined strategy.  And I think this was imperative for Amazon in developing their Amazon Web Services (AWS) back in 2003.

Summary of AWS
Amazon Web Services is THE disruptive technology to the Infrastructure as a Service industry.  Today they provide highly reliable, scalable, low-cost infrastructure platform in the cloud that powers hundreds of thousands of businesses in 190 countries around the world (Amazon).  However, how did Amazon, a company become so successful in Infrastructure as a Service industry?  One reason could be because they had such a clearly defined strategy statement that was simple to understand.

Possible Strategy Overview (2003)

In the reading we learned that a strategy statement can be broken into three parts.  This is a hypothesis of how Amazon addressed each part of the statement

Objective – What objective is most likely to maximize shareholder value over the next several years?

We are adopting a long-term growth strategy.  One essential feature that both Amazon’s CTO and Senior VP Andy Jassy talked about was Amazon's focused on gross margins for AWS in order to deliver a low cost, on-demand solution to Infrastructure as a Service.

Scope – Define clear boundaries of operation and promote experimentation and innovation.

Customer – The target customer for the low cost, on-demand model was software developers/application developers who can use the service to share their application with minimal costs
Geographic Location - This is less important because of the nature of cloud computing, but we want the best bandwidth in the region of large tech cities like San Francisco and Austin, TX.
Vertical Integration – Other services that currently exist in cloud computing aside from Infrastructure as a Service are: Platform as a Service, Software as a Service and Human as a Service.  We do not want to vertically integrate try to incorporate other services aside from Infrastructure.

Advantage – Define what makes the product so great for the company and why would people want to buy it.

Customer – AWS allows customer to only pay for what they need.  This means they do not need to purchase expensive servers and switches while only able to use a fraction of the hardware's computing power.
Amazon – We have been developing Infrastructure for their e-commerce system for over 10 years and have accumulated the software development expertise in building Infrastructure. Additionally we have nurtured strong relationships with their hardware suppliers, and have a lot of control over how the hardware is manufactured.

It’s important to have a clearly defined strategy that helps employees focus on company goals, while not restricting their ability to innovate.  And because Amazon had a clear strategic statement, they are able to compete in a new market they didn't have any presence in previously.

Additional Readings:
History of AWS:

AWS Strategy Points:

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