AWS faces cost-sensitive customers at Reinvent as economic concerns grow

Amazon Web services has been the biggest growth engine for its parent company for most of the past decade, receiving business from some of the biggest technology providers in the world.

But as corporations face the toughest economic environment since the 2008 financial crisis, the huge checks they are writing to AWS for their technology infrastructure are under scrutiny. tighter.

Peter Kern, CEO of online travel agency Expedia Corporation, sees the cloud as an area where his company can reduce fixed costs. In recent years, Expedia has moved a significant portion of its operations to AWS from on-premises data centers.

“We haven’t fully optimized the cloud yet,” Kern said during the company’s earnings call last month. “We’ve moved a lot of technology into the cloud, but we still have a lot of work to do.”

US stocks set to end worst year since 2008. Central banks continue interest rate increase to address rising prices, causing consumers and businesses to worry about an economic downturn. Executives are in cash-conserving mode to placate Wall Street and make sure they can weather a potential recession.

Jennifer Langton, the NFL’s senior vice president of health and innovation, said the National Football League, which uses AWS to generate stats and schedules, is planning conservatively about costs.

“We’re not recession-proof,” Langton told CNBC in an interview at AWS’s annual Reinvent customer conference in Las Vegas this week. She said that the league is in talks with AWS about the terms of a renewed multi-year agreement and that there are several areas her organization wants to prioritize.

Amazon knows customers are facing challenges. In some cases, Amazon cloud employees contact customers to see how they can help optimize spending, said David Brown, AWS VP responsible for EC2 core computing services. know. At other times, he said, customers will contact AWS.

AWS Coming Soon slowest expansion phase since at least 2014, the year Amazon started reporting on its financials. It also missed analysts’ estimates. However, this division still recorded a growth of 27.5%, far exceeding Amazon’s Overall Growth of 15%. And it generated $5.4 billion in operating income, more than 100% of the profits for the parent company.

With such huge cash balances, AWS can afford to accommodate customers in the short term if that means more business in the future. The company did the same thing during the 2020 pandemic, when Amazon sent some users emails with the content an offer of financial assistance.

AWS isn’t the only major cloud provider to address customer budget constraints. In the third quarter, by Microsoft CFO Amy Hood said in October, Azure consumption growth had slowed as the company helped customers optimize existing workloads. Amazon leads the market in cloud computing, with estimated 39% market share.

“If you’re looking to tighten your belt, the cloud is the place to do it,” said AWS CEO Andy Selipsky in his keynote presentation to more than 50,000 people on Tuesday. Selipsky says that moving IT jobs to the cloud can help budget-constrained organizations save money, citing customers Agco and global carrier.

Not everyone agrees. Last year, investors Sarah Wang and Martín Casado of venture firm Andreessen Horowitz published one analysis, shows that a company can cut computing costs in half or more by bringing workloads from the cloud back to on-premises data centers.

Amazon is trying to give customers options to keep costs down. It provides Graviton’s Computing Edition based on energy-efficient Arm-based chips, a less expensive alternative to standard-use versions AMD and smart microprocessor.

“Customers of all sizes are already using Graviton, and they are achieving up to 40% better price performance simply by moving their workloads to Graviton instances,” said Selipsky. He say AT&TDirecTV’s unit was able to eliminate 20% of computing costs by using current-generation Graviton chips.

Selipsky told Jon Fortt of CNBC in an interview that AWS teams are working with customers trying to become more efficient.

“We see some customers now tightening their belts,” says Selipsky. An example is a data analysis software manufacturer Palantirlast month said its operating profit for the third quarter was higher than expected mainly due to cloud and deployment efficiency.

Other companies are following the trend. network application and VMware acquired startups to help businesses streamline their cloud spending. On the Reinvent show floor, several companies touted their ability to cut costs.

Zesty, that announced a $75 million funding round in September, added Sainsbury’s and Silicon Laboratories to its list of clients for the current quarter. The company’s technology can automatically adjust the amount of storage the company is using to avoid waste.

CEO Maxim Melamedov said Zesty has attracted a lot of new potential customers at its Reivent booth, where the startup is handing out candy, socks and stuffed animals as well as giving visitors the opportunity to visit. chance to win AirPods.

“Some of my people lost their voices,” Melamedov said. “We have 15 people who are constantly standing. We are constantly talking.”

CLOCK: AWS CEO Adam Selipsky on the impact of slowing economy, cloud consumption


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