Late Post

Analysts predict Bezos’ move to the board won’t slow the pace of cloud innovation at Amazon

New executive chairman takes a victory lap after fantastic Q4 earnings report and leaves incoming CEO Andy Jassy to deal with anticipated antitrust issues.

AWS CEO Andy Jassy, seen here at AWS re:Invent, in December 2020, will take over the CEO role at Amazon in mid-2021.

Andy Jassy’s promotion to CEO is a good thing and bad thing for the long-time Amazon employee. It’s a reward for a job well done with Amazon Web Services (AWS), the unquestioned leader in cloud services. The new job also makes Jassy the public face of a company that will be facing a lot of antitrust questions, according to analysts. 

The company announced at the Q4 earnings call on Tuesday that CEO Jeff Bezos will move to the executive chairman role in July. Analysts expect Bezos to continue to have a strong hand in guiding Amazon’s overall strategy, so things won’t change dramatically under Jassy’s leadership.

Ed Anderson, a research vice president and distinguished analyst at Gartner, said it’s too soon to know what this change means for Amazon’s competitors.

“We don’t know enough about that succession to know whether AWS is going to promote from within or bring somebody from the outside,” he said. “Those will be big factors in terms of shaping what AWS looks like as a competitor.”

Glenn O’Donnell, vice president and research director at Forrester, said Jassy’s time at AWS proved he has the executive chops to take the reins of the bigger Amazon machine. 

“He excels at vision and execution, two things Amazon will always need to stay ahead of a fierce field of competitors,” O’Donnell said.

SEE: Top cloud providers in 2020: AWS, Microsoft Azure, and Google Cloud, hybrid, SaaS players (TechRepublic)

Leslie Hand, group vice president for IDC Retail and Financial Insights, said it is not surprising that Bezos is ceding leadership of Amazon to Jassy given the contribution AWS makes to revenue and profits. 

“By the same token, I like to think that Bezos can now sit back and bask in the glory that his e-commerce baby is now fully grown having reached the $100B revenue threshold,” she said. “As a retail company, Amazon is not just retail, it owns brands, it is now global, it is now B2B, and 2020 was a banner year from a growth perspective, so why not rest on these laurels?”

David Bicknell, a principal analyst at GlobalData, said in a press release that Jassy’s promotion completes Amazon’s shift from being a retailer to a technology company.

“AWS is pivotal to Amazon’s business and it accounts for a massive 52% of Amazon’s quarterly operating profit, but only 12% of total sales,” he said. “Technology is at the heart of Amazon’s operations, and its success is driven by its strength in the key themes disrupting the tech, media, and telecoms sectors, including cloud, artificial intelligence, and the future of work.”

Bicknell said Amazon scores five out of five in GlobalData’s sector scorecards for those three competencies and predicts that the company’s positioning in these themes will significantly improve its future performance. 

Anderson said Jassy is a natural fit for the CEO role given his deep experience with the development and delivery of technology and the application of those capabilities.

“We think of Amazon as an e-commerce company but it’s a tech company, too,” he said. “Amazon is going to continue to drive tech innovation and leverage the innovations coming from cloud.”

O’Donnell said one change for Jassy will be navigating Amazon through increasing tensions with antitrust regulators. 

“Momentum is building around antitrust moves around Amazon, Facebook and others because Washington, D.C., feels these companies are anti-competitive because of their dominance,” he said. “This is one of the biggest challenges that Jassy is going to face.”

O’Donnell said it’s unclear exactly what Bezos is going to do in his new role, such as maintain a tight grip on Amazon or maybe spend more time on Blue Origin, the aerospace company Bezos founded in 2000.

“For Amazon itself, (artificial intelligence) AI is key to its success and will continue to develop those capabilities, which is what is drawing the attention of antitrust regulators,” he said.

In 2019, Amazon had 45% of the market share for Worldwide IaaS Public Cloud Services, according to Gartner. Microsoft was in second place with 17.9%, Alibaba in third palace with 9.1%, and Google in fourth at 5.3%. According to Gartner’s Market Databook 2021, Amazon is the leader in the cloud infrastructure and platform services market at 49.6%, followed again by Microsoft, Alibaba, and Google. 

E-commerce expert Jason Boyce expects the U.S. House, the U.S. Senate, state attorneys general, and the Federal Trade Commission to put a bright spotlight on Amazon’s market dominance and aggressive business practices.  

“The way I see this is he is pushing Jassy into a human pincushion role for the antitrust fight they are facing over the next few years,” he said. 

Boyce said Amazon has built a supply chain that is insurmountable by competitors ranging from Walmart to Google. 

“We literally need to revamp the antitrust laws because they don’t meet the needs of the digital age,” he said. “Google wouldn’t exist today if legislators hadn’t taken on Microsoft in the ’90s for antitrust issues.” 

As Tiernan Ray reported in ZDNet’s coverage of Amazon’s Q4 2020 earnings report, the company’s Q4 earnings hit $125.6 billion with an earnings per share of $14.09. This exceeded analyst expectations of $119.72 billion in revenue and $7.20 per share in earnings. Ray also wrote on ZDNet that during the earnings call Amazon CFO Brian Olsavsky spoke at length about the significance of the leadership change. According to Ray’s article, Olsavsky said  Bezos’s role will remain “super important” as he focuses on strategic decisions, acquisitions, and “one-way door” issues for the company. 

Robin Gaster, Ph.D., a George Washington University public policy scholar and author of “Behemoth, Amazon Rising,” said that this transition is a test of the corporate culture to see whether it can continue to function at a very high level without Bezos. 

“I suspect Amazon will pass both tests; cultures and flywheels don’t fall apart that quickly, so we may not even know for five to 10 years,” he said.

Gaster doesn’t see much significance in the new CEO coming from the cloud division. He does see a new set of challenges for Jassy. 

“The challenges in retail are quite different from AWS: The latter doesn’t have big money-losing divisions, and there is huge organic growth there now and for the next few years,” he said. “Things are much tougher in retail, though as something of an outsider, maybe Jassy will be able to take some difficult decisions more easily.”

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