Oppenheimer analyst Tim Horan released a report today saying that a spinoff of Amazon Web Services is “inevitable,” according to a story in Investor’s Business Daily.
Horan wrote that such a spinoff will happen due to channel conflicts and the need for AWS to gain scale.
As AWS continues to dominate the infrastructure-as-a-service market, the potential for conflict with customers grows. So far, with AWS’ reputation as the biggest and in some regards, best, provider of IaaS service, the potential conflict is probably not having a serious impact on the company.
However, more and more IaaS services are coming online, giving business more options. At some point, AWS might start noticing a loss of business from customers that compete with Amazon.
It’s clear this potential problem is on Amazon’s radar. Last year at the AWS Re:Invent conference, Amazon CEO Jeff Bezos went out of his way to assure the audience that businesses that compete with Amazon shouldn’t be worried about using AWS.
“We put just as much care into Netflix on AWS as we do Amazon retail on AWS,” Bezos said at the time. “We treat them just as well. We may compete [with Netflix] on Prime Instant Video but we bust our butts every day for Netflix on the AWS side.”
Netflix is a marquee customer for AWS. It’s one of AWS’s largest customers and it has often spoken in detail about its experience running its service on AWS. But Netflix may have started thinking twice about AWS when Amazon launched its competitive streaming video service in 2011.
Bezos and Werner Vogels, Amazon’s CTO, suggested that because of the degree to which AWS is standardized, it’s hardly possible for the company to play favorites. “You can’t run a business like AWS and make exceptions for one particular customer,” Vogels said.
Bezos agreed. “The whole point is to standardize,” he said.
Still, reassure as they might, the dangers of conflict crops up now and again, including by some scaremongerers.
Horan also took a stab at AWS revenue, which Amazon doesn’t disclose. He estimates that 2012 AWS revenue hit $2.1 billion and expects revenue to reach $10 billion in 2016. Plenty big for a spinoff, if indeed those estimates are remotely close.
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