Amazon: Low Margins, High Volume Is Key to Cloud Computing

In an interview with InformationWeek, Amazon’s Adam Selipsky revealed the company’s strategy for dominating cloud computing. “It’s important to have a cloud provider that has a history of lowering prices when they lower costs,” Selipsky said. “We intend to run a high-volume, low-margin business.”

According to Selipsky, the “old guard” companies that are now jumping into cloud computing are looking for 70 percent to 80 percent margins. “Frankly, I think many customers have been ripped off for decades,” he said.

Selipsky noted that Amazon Web Services has dropped its prices at least 31 times. “It’s easy for a company to drop prices,” he added. “The hard thing is being able to afford to drop your prices.” He continued, “It will be extremely hard for most companies to drive to the cost structure Amazon has and will continue to improve upon. … We will absolutely continue to drive down our business costs and customer prices.”

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