Inside the numbers for Amazon Web Services' Q2: Amazon reported second-quarter earnings this week, and as part of it said revenue for the Amazon Web Services segment had jumped 42 percent to $4.1 billion. At the same time, Amazon ramped up spending on AWS infrastructure in the quarter dramatically, spending $8.1 billion on property acquired through capital leases, up 71 percent year-over-year from $6.7 billion. On a conference call, Amazon CFO Brian Olsavsky touched upon the AWS results:
Our usage in all of our large services are actually accelerating and they're growing at a rate higher than our revenue growth. ... We continue to open new regions. We'll be opening five regions in the near future in France, China, Sweden, Hong Kong and a second government cloud region in the East. So, yes, we like the momentum in that business. Stepping back, I would say that while pricing is important, again, we're generally being selected because of our functionality and pace of innovation, the innovation keeps accelerating.
AWS has been continuing to roll out pricing cuts and new services, and these are having an effect on the bottom line, he added:
We've had numerous price decreases, and we continue to have that in the AWS business, both absolute decreases in service costs and also rolling out new services that may be cannibalizing more expensive other services that we provide.
POV: By any reasonable measure, the AWS results are strong. But nor is AWS running away with the market; Microsoft last week reported that Azure revenue had nearly doubled in its second quarter. While Azure is working with a smaller revenue base than AWS, making it easier to post such big numbers, the growth is telling and impressive.
What's important to note is that in the cloud arms race, the weapons vendors are honing in general are good for customers: Richer features, lower costs, better reliability and broader availability. That being said, lock-in remains a key concern, and Constellation believes most enterprises will end up with a multi-cloud strategy, whether they realize it now or not.
Whitman shoots down Uber rumors: HPE CEO Meg Whitman is not moving into the top slot at embattled ridesharing startup Uber, she said in a number of Tweets. Bloomberg had reported Whitman was on the short list to fill the job, which was vacated by Uber founder Travis Kalanick earlier this year following a series of scandals.
“Normally, I do not comment on rumors, but the speculation about my future and Uber has become a distraction,” Witman tweeted. “I am fully committed to HPE and plan to remain the company’s CEO. We have a lot of work still to do at HPE and I am not going anywhere.”
POV: Other big names are now circulating as potential Uber CEOs, including outgoing General Electric CEO Jeffrey Immelt. Uber has plenty of work to do and its board should deliberately carefully before making a choice. Enterprise IT and Uber aren't often said in the same breath, but for all its faults, the company has been a true industry disruptor and its fate is worth watching closely.
Starbucks heats up its 'digital flywheel' strategy: Coffee and tea giant Starbucks has seen its business ebb and flow over the years—one example is its decision to shutter nearly 400 mall-based Teavana stores—and is betting that a broad digital transformation of both its internal IT and ongoing relationship with customers is the way to long-term success. The company first outlined its "digital flywheel" plan in December, and on its Q3 earnings call this week global chief strategy officer Matthew Ryan gave an update on its plans.
A big part of it is about driving customer loyalty. For example, Starbucks now has 13.3 million rewards program members who account for 36 percent of its U.S. business, Ryan said. There are four segments to the digital flywheel: gaining new customers, spending-based rewards, personalized offers and easier ways to order:
The data are clear that when we acquire a new customer, the act of signing up for a digital relationship results in a sudden and sustained lift in spend, as measured by careful pre/post tracking. That's how we're able to drive so much value from a relatively small portion of customers.
Starbucks Rewards are highly motivating and the conversion to a spend-based program has resulted in a clear lift in member spend. Third, personalization, in which we target specific messages and offers to individual customers based upon their history with us, has proven highly effective, as evidenced by test and control measurements in spend per member. Fourth, mobile ordering remained highly incremental, resulting in many more occasions per customer than would be the case otherwise because the convenience encourages more on-the-go visits.
In addition to our long-term digital technology roadmap, we continue to innovate in the short term around our newer technology platforms. We are expanding personalization by offering new offer constructs, real-time triggers and push notifications to engage customers more deeply, building on the momentum that is generating the higher spend per member.
Ryan had a lot more to say about Starbucks plans; a transcript is available here (login required).
POV: Retail is a game that gets tougher all the time, but Starbucks future plans are ambitious and it's aleady been an early mover in customer engagement practices that lead to increased spend. There's something many enterprises can learn from its strategic direction.
