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And i got to check AWS again and i am pleasantly surprised things have improved dramatically!
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There is a well understood (and "generally accepted" [GAAP]) formula for operating profits: Operating Profit = Operating Revenue - COGS - Operating Expenses - Depreciation & Amortization AWS Q2 conf call slides: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M... You can see on slide 15 "Segment Results-AWS" that the segment profit for Q2 was $391MM on net AWS sales of $1.842BB. Both numbers are for the q…
But your capital lease payments aren't included in (ie removed from) that operating profit. Since you don't know which is larger, I remain befuddled how you claim aws is profitable.
If Amazon is breaking out a segment P&L for AWS, they are no doubt making a good faith effort to correctly charge operating expenses, including capital leases, against that P&L. They also don't break out their electricity costs to run their DCs nor their engineering costs attributable to AWS, yet I'm confident that they are charging those costs against the AWS segment as appropriate.
What evidence do you have that Amazon is not removing the capital lease principal payments from the operating profit they're reporting? It's not like they could possibly imagine that's going to "fly"...
I'm trying to understand why large companies use AWS for their primary infrastructure. Both AWS and Azure are obscenely expensive when compared to buying servers and colocating them somewhere. The cloud model works well for bootstrapped startups, but anyone with the resources to buy and manage their own servers is crazy if they use AWS or Azure as their primary server platform.
Cloud providers bring you not just localized infrastructure, but distributed infrastructure, with clear mechanisms for scaling as needed, plus support, etc. With AWS, you have a predictable cost, predictable up-time, and ability to scale at peak, and your costs are spread over time, rather than all up front.
With your own servers you have to build out to handle peak load (and run mostly dormant during non-peak hours), across multiple locations, to achieve the same availability.
I'm not sure the costs for the convenience of AWS are so obscene in such a case. They may still be higher, I honestly don't know, but the convenience benefit is huge. They key bit is that AWS' costs are largely -known-, whereas the costs of DIYing aren't.
Per Netflix's blog post about why they use AWS for serving everything except video content - "We could have chosen to build out new data centers, build our own redundancy and failover, data synchronization systems, etc. Or, we could opt to write a check to someone else to do that instead."
Oftentimes for enterprise, having all your infrastructure in place, done right the first time, with someone else eating any costs associated with the unexpected, and ready to start building your application on, is worth the cost. For enterprise, paying a known amount to avoid risk is oftentimes worth it.
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Agreed - there's an opening for a great desktop software solution to manage all AWS services. Kind of like CloudBerry Explorer but for more than S3.
There is one, it's called elastic wolf
I'm trying to understand why large companies use AWS for their primary infrastructure. Both AWS and Azure are obscenely expensive when compared to buying servers and colocating them somewhere. The cloud model works well for bootstrapped startups, but anyone with the resources to buy and manage their own servers is crazy if they use AWS or Azure as their primary server platform.
Because they are corrupt? Could be? Large companies are basically centrally controlled economies, and we know how that turns out..
It seems to me that large companies live in a special bubble where they are willing to pay extra for everything. On the other hand, they also charge extra, so externally, it will mostly cancel out.
The winners of this scheme are probably the people involved in running (either directly or as shareholders) these large companies, because their salaries (and other bonuses) are artificially inflated compared to the rest of the society. The losers are probably the government and the taxpayer (i.e. the public), these can be easily made to pay extra but it's difficult for them to charge extra.
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Amazon retailer still have competitors coming behind their back, albeit at a distance, but Walmart & co. is nothing to sneeze at. AWS have about ... zero competition where they are right now. Google CLoud, Azure and the like are not doing quite the same thing just yet.
There was a big price correction last year which was fairly clearly attributable to competition, especially Google. There will never be quite the cutthroat competition that retail brings, but Amazon is positioning itself as a logistics provider not a retailer.
Off Topic, Previously I was always put off by Amazon's design. You can click on anything Amazon related, AWS included and see some fugly UI and layout. And i got to check AWS again and i am pleasantly surprised things have improved dramatically!
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AWS contributed $1.82B of the $23.18B in total revenue for the quarter.
That's way more significant than I would have expected. Still, 8% of their revenue contributes 36% of their profits. Makes you wonder why they don't run AWS at the same cutthroat prices as their other businesses.
I wonder how much of that is people forgetting to shut down unused EC2 instances
It really feels like they design the thing to make that happen. I got stung for over $100 just as a casual user, because I never guessed that I had to click through all the (slow loading) regions to see the instances and volumes and snapshots I might have burning money. The web interface is a total clusterfuck.