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2022 09 22T062417Z 1 LYNXMPEI8L07N RTROPTP 4 TECH CLOUD - Business Express
3D printed clouds and figurines are seen in front of the AWS (Amazon Web Service) cloud service logo in this illustration taken February 8, 2022. REUTERS/Dado Ruvic/Illustration

Embracing the future: why AWS revenue decline won’t shake resellers’ trust

Embracing the future: why AWS revenue decline won’t shake resellers’ trust

Written by Vincen Arivannoor, Senior Consultant & Content Owner at VeUP

The recent decline in AWS revenue has become a topic of concern as companies facing economic slowdowns prioritise cost-cutting measures. As businesses reduce their activities and trim their budgets, the demand for computing power and cloud services naturally decreases. This decline in spend directly impacts Amazon Web Services (AWS), the company’s highly profitable cloud computing division that generated a staggering $21.4 billion in revenue Q4 FY22.

Understanding the AWS Revenue Decline

Although AWS still achieved a commendable 20 per cent growth compared to the previous year, this figure represents a significant drop from the 40 per cent growth experienced in the same quarter of 2021. The deceleration in AWS’s growth aligns with Amazon’s overall slower year of growth, marking a notable shift in the company’s performance.

Despite the slowdown in growth, Amazon CFO Olsavsky reassured stakeholders that there is no cause for alarm. He highlighted that new deals are in progress, indicating a pipeline of prospective customers. While short-term belt-tightening may lead some companies to curtail their infrastructure expenses, Olsavsky emphasised that the long-term trends and potential for cost savings through cloud adoption remain intact. In uncertain times, businesses recognise that migrating to the cloud is one of the quickest and most effective ways to optimise costs. 

Now taking this into account, there are two reasons why resellers shouldn’t worry about the decline in AWS revenue growth. 

Reason based on Internal Analysis- The Resilience of AWS and the Long-Term Perspective

Resellers should not lose faith in AWS, primarily because AWS and Amazon have a track record of playing the long game. The success of the Amazon Marketplace is a testament to this approach. The CFO of Amazon emphasized the AWS philosophy of “customer obsession,” stating that their goal is to build long-lasting customer relationships and a business that withstands the test of time. The AWS sales and support teams are dedicated to helping customers optimise their spending, even during uncertain economic times. This customer-centric approach is ingrained in their DNA, reflecting their commitment to nurturing strong customer relationships and maintaining a long-term perspective in their business endeavours.

This aspect of resilience shown by AWS for the long-term is echoed by James Campanini, CEO of VeUP:

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“We firmly believe in the economic theory of business cycles, where recessions and expansions are natural occurrences. As AWS faces headwinds in the current economic climate, it’s important to remember that these cycles are cyclical in nature. Just because the recession has affected certain industries, such as smartphones, it doesn’t mean that the market will revert to using outdated feature phones. The public cloud, including AWS, is the present and future of technology infrastructure. While there may be periods of downturn for cloud service providers like AWS, the overall trajectory of the cloud market, when viewed in the long term, is undeniably upward. We remain confident in AWS’s capabilities and the growth potential of the cloud market for the next decade and beyond.” 

Reason based on External Analysis- Appeal of Cloud for cutting edge XaaS is still high

The appeal of cloud computing remains strong, particularly for cutting-edge high-tech companies. Resellers, in particular, highly value XaaS products, which encompass Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS). These offerings not only provide flexible solutions for businesses but also bring additional revenue opportunities for resellers. Resellers working with ISVs & high tech partners that provide XaaS products are able to generate revenue through various means, such as billing management margins, value-added technical services, and AWS Marketplace reselling. Therefore, the growth of XaaS serves as a good indicator for the future growth of the AWS ecosystem.

As per Marketline Research, in 2021, the Software-as-a-Service (SaaS) segment accounted for the largest share of the cloud computing industry, generating total revenues of $176.9 billion, representing 63 per cent of the industry’s overall value. SaaS offers numerous benefits to businesses, eliminating the need for hardware purchases and providing on-demand features and automatic updates. The seamless integration and extensive customisation opportunities offered by SaaS have led to its widespread adoption among businesses of all sizes and types. While SaaS continues to dominate, the Infrastructure-as-a-Service (IaaS) segment is experiencing the highest growth rate within the industry. Finally, the emergence of integrated IaaS and Platform-as-a-Service (PaaS) options is expected to drive the next wave of cloud computing innovation, further expanding the revenue potential for resellers within the AWS ecosystem.

Final Thoughts

Cloud resellers have numerous reasons not to lose faith in AWS. The recent decline in AWS revenue growth should not overshadow the long-term prospects of the AWS ecosystem. While short-term economic challenges and belt-tightening measures may impact spending on cloud services, the resilience and customer-centric approach of AWS provide assurance for resellers. The proven track record of AWS and its commitment to building strong customer relationships highlight its ability to weather economic downturns and thrive in the long run.

Moreover, the appeal of cloud computing, particularly XaaS products like SaaS, PaaS, and IaaS, remains high, especially among cutting-edge high-tech companies. Resellers recognise the value of these offerings and the additional revenue opportunities they bring. The growth of XaaS serves as an indicator of the future growth potential within the AWS ecosystem, as businesses continue to adopt cloud services for cost optimisation and operational efficiency.

In partnership with AWS, resellers can leverage the company’s extensive infrastructure, advanced technologies, and strong customer relationships to navigate through economic uncertainties and deliver value to their clients. By aligning their strategies with the long-term vision of AWS and capitalising on the growth of XaaS, resellers can remain confident in the future prospects of the AWS ecosystem and continue to thrive in the dynamic cloud computing market.

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