Amazon (AMZN, Financial) Web Services is a juggernaut in its own right.
The technology division of Amazon reported $12.219 billion in revenues in 2016, recording growth of 55% compared to the previous year. The best part about Amazon Web Services is that its operating margin exceeded 30% during the last quarter, and the segment continues to be a highly profitable one for the company. Despite its lead position in the market, and solid growth, Amazon made several moves this year that have the potential to keep its cloud unit’s revenue on the growth path.
Amazon’s move into business productivity
Not many are aware of Amazon’s presence in the office productivity segment dominated by Microsoft (MSFT, Financial). But Amazon has Workdocs, similar to Microsoft Word, Workmail – a webmail service – and Chime, a video calling and conferencing application – three things that you cannot do without in a workplace.
Amazon is obviously late to this segment, but by launching three products in three years the company has made its intentions clear – that it wants to slowly build itself into a position in the office productivity and collaboration market, where Microsoft boasts of 85 million monthly active users (MAUs) on Office 365 and revenues of $7.4 billion from the Productivity and Business Processes segment during the most recent quarter.
Amazon’s industry-specific solutions
Amazon is also slowly building industry-specific solutions that can work on top of Amazon Web Services. Over the course of the past year or so, it has built a suite of products that address the needs of game developers.
“The world’s No. 1 Infrastructure as a Service provider launched Lumberyard, a game engine integrated with Amazon Web Services and Twitch, in early 2016, which allowed game developers to build and host their games on AWS, using Twitch for live streaming.” - 1reddrop
But Amazon was not satisfied to merely offer a game development platform. The solution addresses nearly all the stages of the game development lifecycle, from the point of development to hosting to an after-sales gaming community platform.
This is not SaaS or PaaS or even IaaS; it is a mix of all three and a turnkey solution that addresses the needs of a specific industry segment.
Amazon Connect – A foray into contact center solutions
Amazon Wednesday announced the launch of Amazon Connect, which companies around the world can use to build scalable contact center services. Amazon says that the technology behind it is what they use for their own customer service needs. The new contact center solution is tightly integrated with other services on the Amazon Web Services platform, and it also utilizes the company’s AI strength in the form of Amazon Alexa.
Though on the surface these initiatives may seem incongruent and thinly spread, it is a clear indication that Amazon is thinking several years down the road. By building industry-specific end-to-end solutions, it hopes to be a significant presence in multiple industries in the future. That’s as good a moat as any tech company can build using its existing strengths, and it only adds to Amazon’s upside as far as investors are concerned.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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