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|User Info||The United States of SCAmazon; entered at 2017-10-28 12:37:42|
If I am following the chain of logic here AWS is pretty much subsidizing the rest of Amazon. Yet AWS has falling margins and is now competing against Microsoft, Oracle, and Google, to name a few.
Do realize, however, that the other guys have little incentive to raise a lot of hell in this regard.
Consider that "cloud" computing is basically leasing computers in a rack. It's a commodity business. Computers are cheap, low-margin things and putting up a building with power and A/C in it isn't exactly rocket science.
So how do you get double-digit margins out of that? You don't for long, especially with large players in the game who have scale. So why are margins going down slowly rather than collapsing? When the PC clone market showed up PC sales went from 30% margins to 8% in about three months and stayed there forever into the future.
This is inevitable with large firms in any mass-capable tech endeavor EXCEPT if those players all wink and nod at each other. You see, if AWS is the price maker (and being first they were) what large company wants to be the one who blows that up and destroys their own margins in the process?
Ah, grasshopper, now we're getting somewhere.
Small players will come in and cannibalize the bottom, and they HAVE and ARE. Witness Digital Ocean, among others. But Oracle, Microsoft and Google? Do you really think they want 10% margins instead of 30% margins?
Wink-wink-nod-nod but by the way that's illegal too -- not that anyone cares about that sort of thing, yes?