Amazon's Infrastructure Services Business Continues To Gather Interest

(Mis)Uses of Technology

from the cheap-CDs-and-computing-power dept

While Amazon is still best known as a leading internet retailer, it’s been increasing its B2B infrastructure offerings, both in terms of web services and also services like storage and fulfillment for other retailers. The situation Amazon faces is that while its revenues are healthy — $3.02 billion in the first quarter — its margins are pretty anemic, with it earning just a $111 million profit in the same period. Enter the B2B services, which allow Amazon to make use of the massive infrastructure it needs to have in place to meet peak demands, but which goes unused most of the time. These services carry higher margins, and largely take advantage of the sunk costs of the technology spending needed to support Amazon’s business, and now look to hold the key to the company’s future growth. One Wall Street analyst says that the digital infrastructure market was worth $196 billion last year, so it’s one with a lot of potential for Amazon. Still, it’s unlikely that the services business will overtake Amazon’s retail business any time soon, and the likely entrance of other players in the market (one that begins with “G” and ends with “oogle”, for instance) could have a very disruptive effect — but it’s worth considering Amazon’s future as a services provider, rather than just a retailer.