Amazon will keep on raising its cloud spending


Amazon(s amzn) didn’t wow the street with its second-quarter earnings news but the company will definitely keep investing in its cloud infrastructure. For its upcoming third quarter, it plans to spend a healthy $800 million to $900 million in capex money on technology, Amazon CFO Tom Szkutak told analysts on the company’s earnings call.

That’s up considerably from the $657 million Amazon devoted to buying fixed assets “including internal-use software and website development” technology for the just-closed second quarter. The comparable figure for its first quarter was $433 million.

The company does not —  it probably cannot — break out how much of that tech spending flows into the Amazon Web Services computer infrastructure it rents out to customers vs. the IT it uses to run its gargantuan retail business.

One thing is clear: While Amazon is the market-leading cloud service provider, other companies with deep pockets — Microsoft(s msft), Rackspace(s rax), Google(s goog), Hewlett-Packard(s hpq) among them — are willing compete with Amazon in this space.

(That’s a race that some onlookers deem irrational. They say these companies are spending multiple billions of dollars to crack what is probably the lowest-margin business in technology. But there you have it.)

That’s one reason the company must keep spending. And as it adds more and more value-added services atop its infrastructure, along with support services to help customer run it, its costs will likely continue to rise.

Photo courtesy of Flickr user Will Merydith



Hi Barb – would love to see more insight and thoughts into your last two paragraphs. Where is this going? What is the end game and where does it take them and the industry as a whole?

Keith Townsend

I got into an interesting conversation about vendor lock in when in comes to AWS. I’m advising a company on if to look at AWS and it is difficult to argue not to go with AWS because of lock in. It’s fast, cheap,reliable, feature rich and they continue to invest and innovate.

I understand the vendor lock in concerns but the functionality is hard to argue against.

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