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Amazon: a business deveoplemnt masterclass (57)

The tyrant of e-commerce

Most of us know Amazon as the e-commerce giant. Anything you might want to buy starting from books to even medicine (!) these days can be found on the platform. Given my decision to boycott the company (for more, look at P.S.), I can tell you that this complete dominance of the e-market has made my life difficult. There are many items that I can only exclusively find through Amazon and for the rest the price and convenience guarantees are simply great.

But what if I told you that e-commerce is only a fraction of Amazon's profits. And no, I do not refer to other consumer facing Amazon products such as Amazon Prime or the smart home assistant Alexa. Instead, Amazon also has a very successful business to business product called Amazon Web Services or AWS.

Internet roots and infrastructure realities

To explain what AWS is and does, I think it is a better idea to go back in time a bit and share some context. You see, Amazon was one of the early adopters of internet commercially. The original vision of the company was to be an internationally accessible book store - that simple!

In their struggle to make their services accessible by the early internet, they quickly ran into a problem. To scale an e-commerce platform, you need a robust infrastructure. For every targeted region, server rooms need to be installed.

Server rooms come along with important problems though. For starters, they require an upfront investment and maintenance. This was possible to overcome for an ambitious company with a clear vision.

Turning inefficiency into reality

What was harder to accept, however, was how wasteful the investment seemed at face value. Amazon would often only use a fraction of the server capacity they had to build. You see, servers must be scaled to handle peak traffic, which means most of the time, resources sit idle!

So it's easy to end up paying a lot for infrastructure that isn’t constantly in use. No wonder many internet companies went belly-up when the dot-com bubble burst in the early 2000s.

But Amazon found a clever way to turn this problem into an opportunity. Since they had already made the investment, why not rent out their excess computing capacity to other companies? Why not provide on-demand infrastructure where there was a need?

And that’s precisely what AWS is. It’s a cloud platform for hire, where organizations and individuals can access storage, computing power, networking tools, databases, machine learning services, and much more...all on-demand and at scale. AWS allows developers to deploy applications globally, without needing to build and maintain their own data centers. It’s the backbone behind many of today’s most popular digital services, including Netflix, Airbnb, and Spotify

The business lesson - leverage your hidden assets

The creation of AWS teaches us an important lesson in business development: true innovation sometimes lies in rethinking what you already have. Amazon recognized that their infrastructure “problem” was actually a strength. Instead of treating excess server capacity as waste, they turned it into one of the most profitable business units in tech history.

Understanding your unique capabilities and how those capabilities may be valuable to others is key to unlocking new markets and revenue streams. Sometimes, the best opportunities are hidden in plain sight.

P.S. Regardless of the impressive business accomplishments, I have long decided to boycott Amazon. The control of the press (Washington Post), the horrible treatment of employees (against unions, long hours, driver exploitation) the non competitive practices (copying successful items from Amazon, monopolistic behaviour), incessant tax avoidance, and the recent endorsements to reactionary politicians have left me appalled.


 

Comments

  1. PoulJune 22, 2025 at 1:13 PM

    I hope you got the link to the TEGENLICHT programme where Varoufakis was interviewed about his analysis of technofeudalism

    ReplyDelete
    Replies
    1. New PhaistosJune 26, 2025 at 6:50 AM

      I am indeed aware of his opinions and I have to say, I agree with a lot of his points. Especially how unregulated markets drift toward monopoly and rent-seeking (neo-feudalism). My conclusion though is that the real issue is policy. He's great at pointing out the problems, but I’m not sure he offers a clear alternative. I still think strong social democracy with smart regulation is (the only) starting point.

      Delete

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