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Amazon chief Jeff Bezos claims the way his firm’s cloud services arm operates is very similar to its Kindle device business because neither depends on hardware sales to make money.
The closing keynote of the Amazon Web Services (AWS) Re:Invent conference in Las Vegas, saw Bezos answer questions posed by the firm’s chief technology officer, Werner Vogels.
During the session’s opening remarks, Bezos flagged the parallels between AWS and the retail giant’s Kindle device business, noting that neither of them depends on hardware to make them money.
“One of the unusual things that we do in the Kindle device business is to sell our hardware near break even [because] we make money when people use the device, not when they acquire it,” he said.
“If we don’t make money when people buy the device, we don’t need people to be on the upgrade treadmill. We have people still using five year old Kindle ones, and we’re perfectly happy about that.
“AWS is very similar. It is pay as you go...and we are not incentivised to get people to over buy hardware to operate,” Bezos added.
He also noted that Amazon and AWS both operate high volume, low margin business models, which – he claims – helps both organisations remain nimble and efficient.
Incidentally, this was a theme touched on during yesterday’s opening keynote, with AWS senior vice president, Andy Jassy, which saw him lambast high margin tech firms for allegedly exaggerating the benefits of private cloud.
During Bezo’s keynote, he said the problem with running a high margin business is that it is “impossible to be efficient” and it also allows people to “cover a lot of sins.”
“We wouldn’t know any other way. We’ve been doing this [running a low margin business] for 18 years and it is deep in our culture,” he said.
“I like it, because it’s more aligning with customers. It keeps you honest [by] operating leanly and efficiently.”
One thing he said had taken him by surprise with AWS was how keenly its services have been adopted by the enterprise, government departments and educational organisations.
“We knew it would be popular with start-ups,” he said.“This early into something new...to see so much traction is a huge surprise for me.”
The session also saw Bezos share his thoughts on entrepreneurship and what companies should focus on when it comes to safeguarding their future success.
For instance, he said people should focus less on what changes the future may bring, and more on the things that are unlikely to change.
“I frequently get [asked] the question, what will change in the next 10 years. I never get the question, what’s never going to change. I submit to you that the second question is the more important of the two,” he said.
“In retail, we know customers want low prices, and we know that will be true 10 years from now...[and with AWS] it is impossible to believe that 10 years from now, people will say, I love AWS, but I wish it was more expensive...[or they] would improve the APIs at a slower rate.”
And, for any budding entrepreneurs in the audience, he had this advice. “Never chase the hot thing [because] you’ll never catch it," he said.
“Position yourself and wait for the wave. That’s the number one piece of advice I’d give to someone who wants to start a new company,” he concluded.