If you want an alternative to the usual gang of businesses cited from conference-room podiums as “disruptive,” I’d suggest a rarely mentioned candidate whose impact will far exceeds taxicabs and hotel rooms.
I’m speaking of Amazon. Not the retailer, but the cloud computing division of that company. Amazon Web Services (AWS) is not only throwing off more profit than a retail business that is nine times its size, but it may turn out to be the company’s most valuable long-term asset.
In reporting its quarterly earnings last week, Amazon said AWS grew 64 percent year-over-year and is on track to bring in more than $10 billion this year. Its $604 million quarterly profit dwarfed the $467 million that Amazon reported for its much-larger retail operations.
AWS is a steamroller. Analyst firm Gartner last year estimated that its customers deploy 10 times more IT there than on the next 14 cloud infrastructure services combined. The U.S. Department of Defense is moving most of its processing there. Netflix, which is estimated to drive as much as 30 percent of Internet traffic at some times of the day, runs on Amazon.
The success of oft-cited disruptors like Uber and Airbnb is often attributed to customer experience and “frictionless” commerce. Uber has used those factors to take a chunk out of the $16 billion U.S. taxi and limousine industry. Airbnb is messing up the $180 billion U.S. hotel business.
Amazon has revolutionized customer and experience too, but the industry it’s upending is worth more than $1 trillion in the U.S. alone, and more than $3 trillion globally.
It’s attacking a process that has a lot more friction than hailing a cab. Buying and installing business IT equipment and software has long been an excruciating ordeal. There are hundreds of vendors to consider, agonizing contract negotiations, months-long installation cycles, and a swarm of hidden fees, not to mention the cost and frustration of building and managing data centers to hold all that stuff.
Along came AWS with a simple proposition: tell us how much computer power you need, give us a credit card, and within a few minutes you’ll be live. If you want, we’ll also store, secure, and back up your data. Do you want powerful business applications to go with that? Here’s a software marketplace that’ll have you up and running in a snap. Oh, and you only pay for what you use.
No sales reps. No negotiations. No hidden fees. 51 price reductions over the past decade. Is it any wonder that the 10-year-old public cloud market is on track to be a $200 billion industry this year?
The impact of AWS’s disruption is only beginning to be felt. Sales to cloud vendors are all that’s propping up the mainstream server market right now. There are no new software ventures being funded to deliver anything but cloud services. The chief information officer of General Electric, the nation’s eighth largest company, recently called AWS “our trusted partner that is going to run our company for the next 140 years.”
The ripple effects of the Amazon cloud will far exceed anything Uber or Airbnb create. The lesson is that disruptive innovation begins not with delivering something that’s incrementally smaller, cheaper, or faster but with knowing customers at a psychological level and attacking their biggest sources of pain. Do you know what those are?
This article was written by Paul Gillin from Business2Community and was legally licensed through the NewsCred publisher network.