AWS Becomes "A-Cloud", an Independent Entity
A-Cloud is positioned to address the whole multi-trillion dollar IT marketplace
Goldman Sachs to lead A-Cloud IPO - launch customers include Walmart and Apple
[Important: This document is not an Amazon production. It describes a hypothetical process that could take place, but the author is not an Amazon employee and has no information to suggest that any such process is in fact taking place.]
SEATTLE--(Business Wire)--December 1, 2020-- Today, at AWS re:Invent, Jeff Bezos and Andy Jassy jointly announced A-Cloud, a new Delaware corporation which will assume ownership of Amazon Web Services' assets and become the employer of existing AWS employees. This will make A-Cloud's services more attractive to customers who compete with Amazon in one or more market segments, and free Amazon.com to build custom IT infrastructure where A-Cloud services don't fully meet its needs. To get started with A-Cloud, visit A.Cloud.
AWS has become the leading public-cloud provider, offering the widest range of services backed by the strongest security, availability, and data-protection infrastructure. Now, organizations who compete with Amazon want to take advantage of AWS's industry-leading offerings without having to worry that they are strengthening a competitor.
From the AWS-customer point of view, the experience will be seamless. All existing AWS services will continue to operate exactly as before wth no changes of any kind required in any customer application.
"AWS is one of the Amazon.com creations of which I'm most proud", said Jeff Bezos. "Its success at improving IT cost, security, and performance of large and small organizations across the business, government, education, and nonprofit sectors constitutes a major contribution to the way everyone uses technology. Now it's time for it to spread its wings and address the whole IT market, end to end and top to bottom."
Andy Jassy, CEO of A-Cloud, said "We owe everything to Jeff's leadership team, and everyone at A-Cloud joins me in a hearty thank-you. Now it's time for our team to work even harder at understanding and meeting customer needs across the IT horizon."
Following on A-Cloud's IPO, to be managed by Goldman Sachs, A-Cloud will acquire all current AWS assets from Amazon.com for a one-time payment of $100 billion. Also, Amazon.com will receive a 20% equity stake in A-Cloud. Jeff Bezos has agreed to join the A-Cloud Board of Directors, but will not seek nor accept the Chairmanship.
A-Cloud will continue the rapid pace of innovation for which AWS has been acclaimed, without ever losing focus on delivering the best security and uptime available from any vendor. A-Cloud looks forward to serving Amazon.com as a customer, but understands that Amazon may choose to operate some of its own data infrastructure to meet specific needs or location requirements that would not be well-served by A-Cloud.
"Walmart.com is the world's largest retailer and has developed an outstanding online-shopping experience" said Doug McMillon, Walmart CEO. "We don't see online infrastructure as a core competence, and have agreed in principle to transfer our applications to run on A-Cloud infrastructure. We expect the cost savings to be massive, without any loss of responsiveness or security."
"Apple iCloud has become an essential part of the customer experience on iPhone, iPad, and Mac" said Tim Cook, Apple CEO. "We look forward to relying on A-Cloud services to strengthen iCloud without any concerns about it competing with Apple in any of our business segments."
"AWS has served Amazon.com retail superbly for fifteen years now" said Jeff Wilke, CEO:Worldwide Consumer at Amazon.com. "We're confident that A-Cloud will continue to support our retail operations with the reliability, security, and attention to detail that we've come to rely on. There are a few select areas and geographies where we plan to build some very Amazon-retail-specific infrastructure, but for general-pupose public-cloud services, we're all-in on A-Cloud".
External Frequently Asked Questions
1. What are you launching?
We are launching A-Cloud, a new corporate entity of which Amazon.com will be a shareholder but over which it will not exercise equity or management control. A-Cloud will assume all the assets, operations, and employees of Amazon Web Services.
2. Why is this good for AWS customers?
AWS has been scrupulous in declaring and ensuring that customers own their own data and that it is not accessed by anyone unauthorized, including any AWS employees. However, some organizations are strategically reluctant to commit business-critical software and data to infrastructure owned and operated by an organization whose parent corporation may be one of their competitors.
With the arrival of A-Cloud, this strategic concern vanishes. Customers can choose between A-Cloud and one of its public-cloud competitors strictly on the basis of the range, quality, and pricing of the services on offer.
3. Why is this good for Amazon.com?
As a matter of policy, Amazon.com services are strongly encouraged to use AWS services, as opposed to purpose-built Amazon retail technologies. The cost attributed to Amazon.com groups for use of AWS is an internal transfer price, and there is room for debate as to its fairness both to Amazon.com and to AWS.
Obviously, since Amazon.com will be a large customer of A-Cloud, it will not be paying list prices. But the prices will be denominated in real money and there will be no suspicion that either party is accepting an unreasonable deal.
Additionally, there may be certain Amazon.com services that, for locational or technical reasons, are difficult to port to AWS. With the launch of A-Cloud, Amazon.com gains the option of building and running its own infrastructure where appropriate, or even choosing in some cases to use a competitive public cloud provider.
4. Will AWS pricing change?
AWS has a track record of regular price cuts. There is no reason to expect that this will change.
5. How do I switch from AWS to A-Cloud technology?
You don't have to do anything. All the existing APIs and endpoints and services will work exactly as before. All AWS accounts and billing will work as before.
6. Why the corporate transaction structure, with the large payment and 20% equity stake?
Amazon.com has invested hugely in the creation and growth of AWS. It is now enjoying a substantial profit stream which it has fairly earned, and the subtraction of which might cause financial stress as Amazon.com continues its focus on customer-obsessed growth.
This transaction gives Amazon.com a large financial reward, equivalent to several years of AWS profit, plus a potential long-term reward from its equity stake in A-Cloud.
Simultaneously, the IPO gives the investing community a chance to partipate in A-Cloud's demonstrated ability to grow quickly while operating at a substantial positive margin.
Internal Frequently Asked Questions
7. Why are we doing this?
The connection with Amazon is an increasingly important factor limiting the growth of AWS. As a matter of strategy, Amazon continues expanding into multiple markets and, whether or not customers should worry about their cloud provider being associated with a competitor, they do. We estimate (see Appendix C) that spinning out A-Cloud will increase its projected 2025 revenue from $75B to $110B.
Second, the requirement to use AWS for every purpose in every geography may not always serve Amazon retail optimally.
Third, all of the large US technology companies are coming under increasing antitrust scrutiny, and Amazon is no exception. The use of AWS profits to subsidize Amazon's drive for growth in many loosely-related sectors of the economy can only aggravate those concerns. The independence of A-Cloud will remove one of the key irritants in this space.
8. What will most please customers about the launch of A-Cloud?
The vast majority of IT people have come to understand the advantages of moving their app deployments from their own infrastructure to the public cloud, including increased agility, world-class security, and reduced costs. Now, when they approach leadership with the idea of moving to the cloud, they will no longer have to deal with fear that they might be empowering a competitor.
9. What do we want customers to say about A-Cloud?
"I may not love everything about my AWS bill, but now I'm not worrying about some of it going to help Amazon compete against me in my own market."
10. What will customers most dislike about the launch of A-Cloud?
IT leaders who have serious concern about losing control of their own infrastructure will no longer be able to resist moving to the cloud by arguing that this will lead to them depending on a competitor.
11. How do we know that this is what customers want?
Customers, in executive-to-executive conversations, have been clear that they have strong concerns about making strategic commitments to a service provided by a competitor. Walmart has been particularly vocal and has pressured its business partners to avoid using AWS.
12. Might Amazon.com use services on Azure or Google Cloud?
After the launch of A-Cloud, Amazon.com will be perfectly free to make whatever technology arrangements suits it best. This would be a little bit surprising since Amazon has developed a large amount of expertise in using AWS effectively, and retains an equity stake in A-Cloud.
However, one can imagine applications which don't need much more than a virtual Linux instance, in cases where Azure or Google Cloud has a region in closer geographic proximity to a large retail site than any A-Cloud region; in this case, using an alternative service might be a great choice.