Decoding the AWS Q4 2016 Earning Report for Enterprise IT Organizations
Amazon announced its results on Feb 2, 2017, and looks like they’ve had a really good quarter. The headline says, up 22% sales $43.7B. Big numbers!
Interestingly, where most companies would talk about their earnings, Amazon talks about its free cash flow. That’s important because Amazon is really concerned about how much cash it brings in, how much cash it has spent, and how much cash it can hold on to – because that’s what fuels its growth. So, a very good quarter for Amazon there. But what about AWS? Here’s a video that tells you everything that you must know about the AWS Q4 2016 Earning Report and what it means to enterprise IT organizations like yours.
AWS had a very good quarter with $3.54B revenue. And you can see from the graph below that it has had a steady growth of revenue over the past 2 years. But the line representing the growth rate is declining and trending downwards. However, AWS still achieved 47% growth rate in a quarter, and most companies in the IT industry would kill for that kind of a growth rate.
Let’s talk about AWS Q4 highlights
Firstly, it’s had $3.54B revenue, and that’s huge. Interestingly, it’s also had $926M of operating income and again that goes back to the cash flow that Amazon pays so much attention to. It’s got a 26% margin. Now, in the past many companies/vendors would say that Amazon prices its AWS so low because they don’t have to churn profits and so they subsidize it – they’re losing money. Well, obviously that’s not right. Amazon achieved $926M of operating revenue at 26% margin – it is a very healthy business for them.
Over the course of 2016, AWS released over 1000 feature improvements. Some of those are new services, some are improvements to existing services, and some of them are relatively small improvements. For example, a tweak to the instance size offered with an instance family. But clearly, AWS is constantly improving its offerings.
Amazon identified 38 accomplishments in its Earning Report, and AWS accounted for 12 of them. This shows the importance of AWS within the overall context of Amazon’s business. And AWS re:Invent (Amazon’s yearly conference that focusses on AWS) had 32,000 attendees – it was a giant conference. It was 56% up from the previous year. So clearly, there are many more people who are interested to learn about AWS and choose to go up to the source and gather real information.
What does all of this mean?
Here is a chart that shows the results of a survey by JP Morgan in 2016 to find out what proportion of their application portfolio is placed into public cloud environments today and the plan up to 2020. They surveyed CIOs across large enterprises. In 2016, about 16% of applications were deployed into public cloud environments, but by 2020 it was going to be 41%. A dramatic change in the way that enterprises managed their application portfolio. But what about after 2020? Is it going to stay at 41% or will it continue to grow? Well, my speculation is that it will continue to grow. That’s the context to what enterprises are planning to do.
- AWS is at $16.5B revenue run. Which means that it’s a large business that is growing quite rapidly. In fact, it’s the fastest growing enterprise technology vendor ever. I’ve gone back and researched – there’s never been any other company that grew at this scale, with this sort of revenue and this fast.
- AWS does have a declining growth rate, but 47% is still the envy of the industry. When most participants are flat or down, 47% is unbelievable.
- At a 50% growth rate, AWS will be at about $60B by 2020. Which means that it could potentially be one of the largest in the industry.
- AWS has a staggering pace of innovation. With 1000 feature improvements released in 2016, probably they are going to have over 1500 innovations this year.
- Overall this kind of growth is unprecedented in the IT industry. There’s probably never been a vendor like AWS.
- From the perspective of enterprise IT organizations, close to 30% -70% of the staff will be AWS involved and that includes, developers, operations, project managers, finance—which leads us to the next point.
- AWS skills are going to be critical to your organization’s future success, there’s no way to get around it. And going forward, enterprise IT organizations must have a plan to build, architect, operate, and manage their IT applications. This must include your plan to acquire AWS skills as well.
There you go. The AWS Q4 results and what it means to enterprise IT organizations like yours. If you’ve got questions that you would like me to address, reach me at email@example.com. I’ll be glad to answer them for you.
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