Why Amazon Web Services Is Making The Leap Into Supply Chain Management

 Photo: Getty Images

For entrepreneurs still feeling the sting of global supply chain turbulence, there is a new tool coming to market. Amazon Web Services is delving into supply chain management with a new cloud-based application to help businesses manage their inventory and coordinate their networks of manufacturers, suppliers, distribution facilities, and transportation providers.

The machine learning-powered software, which is now available in preview, offers a real-time visual map of a company’s entire supply chain network and aggregates data from other enterprise applications and suppliers into a single system. Based on that information, the application offers automated alerts and recommendations about inventory rebalancing, lead times, and potential risks, such as backlogs or stocks that are running low.

AWS CEO Adam Selipsky announced AWS Supply Chain during the AWS re:Invent conference in Las Vegas last week. “The past two years have highlighted the importance of supply chain resilience. From baby formula shortages to ships circling ports unable to unload, the disruptions have been widespread and deeply felt,” said Selipsky during his keynote speech. “AWS Supply Chain helps you mitigate risks and lower costs.”

While congestion in the global supply chain has improved from the worst levels seen during the height of the pandemic, managing logistics remains a pressing problem facing entrepreneurs. In November, the global supply chain pressure index increased for the second straight month. The New York Federal Reserve, which calculates the measure, said that China was the biggest contributing factor.

The manufacturing superpower, which produces nearly 30 percent of products worldwide, spent much of the past month under strict Covid-19 lockdowns, and that nationwide halt has slowed the global supply chain’s march back to normal. Small-business owners have felt the impact. Nearly a third of business owners report that supply chain disruptions have had a significant impact on their business, according to the most recent monthly report from the National Federation of Independent Business.

Of those surveyed, only one out of 10 said that their business had not been impacted by recent supply chain disruptions. Fixing that pain point has become a major opportunity for the B2B market, and AWS is not the first company to make a leap into the sector. Logistics and supply chain management grew into a $20.24 billion industry this year, according to the research and consulting firm Gartner–making it the fastest-growing market within enterprise software applications.

Even Selipsky’s rollout at the AWS re:Invent conference came less than a month after Microsoft unveiled its own supply chain management platform in mid-November. Still, Amazon, which ships 1.6 million packages a day, could be uniquely situated to solve the supply chain crunch for other businesses, because the homegrown tool harnesses Amazon’s own expertise and data.

“It combines nearly three decades of Amazon.com’s innovation and learning and experience with its own supply chain as we’ve modeled and built it over the years,” said Tariq Choudry, manager of new products and strategy for AWS. He spoke during a breakout session at the conference that discussed applying machine learning to the supply chain and detailed more of the functionality of AWS Supply Chain.

Be warned: Business owners should prepare to keep dealing with logistical problems in the new year, because the AWS CEO made it clear that its foray into supply chain management is a long-term play. “This is just the beginning,” said Selipsky in his keynote speech. “We’re going to continue to invest here.”

Source: Why Amazon Web Services Is Making the Leap Into Supply Chain Management | Inc.com

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What is Supply Chain Management? Aberdeen Group (Market Research)
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Amazon’s Devoted Cloud Customers Face A Decision After Outages: Leave, Stay Or Diversify?

As companies increase their reliance on cloud providers to store vital data, a rash of AWS outages has riled clients, with some looking to hedge their bets with access to other platforms.

When Amazon Web Services suffered its third major outage in a matter of weeks last month – affecting millions of people, from Citi Bike riders to Disney+ viewers and Delta Airlines customers – almost none of its corporate clients expressed frustration publicly.

But within boardrooms and corner offices, the most recent outage on December 22 was the latest reminder of the risks of relying on a single cloud vendor. “The AWS outages were a black eye for the company as more enterprises race to the cloud,” says Dan Ives, an analyst at Wedbush Securities.

AWS has long been the cloud leader, holding 41% of the global cloud infrastructure market, and generated $16 billion revenue in the third quarter of 2021. Though as a first-mover cloud vendor since it launched in 2006 – becoming essential for small and medium businesses looking to outsource their networks – AWS has been fending off tough competition from Microsoft, which Gartner says grew twice as fast as AWS in 2020 as it moved to secure large corporations.

Microsoft doesn’t break out its public cloud revenue, but the most recent comparable figures from Gartner show that in 2020, Azure generated $12 billion revenue from public cloud infrastructure services, compared to $26 billion by AWS. (Google Cloud trailed at $4 billion).

Now that outages have reinforced the risks of relying on one vendor, signs that corporations are increasingly turning to Microsoft are starting to emerge. Research published this month by Bank of America shows that 23% of chief information officers at 185 large companies around the world expect to spend most of their cloud budgets over the next 12 months on Microsoft Azure, compared with 11% for Amazon AWS.

A spokesperson for AWS contended that the company has a better track record of reliability than any other cloud provider. “Pioneering this level of reliability at the scale of AWS is an unprecedented engineering accomplishment,” the spokesperson said in an email. “However, we understand how critical our services are for customers and their end users, and we’re not satisfied unless performance is indistinguishable from perfect.”

AWS also said it believed clients should stick to multiple cloud regions within AWS, rather than entering multi-cloud agreements with other vendors to manage exposure to outages. “A multi-cloud architecture is technically complex, creates increased latency, and results in lower actual availability and resiliency than architecting for high-availability on AWS,” the spokesperson said.

Microsoft declined to comment.

Companies are typically reluctant to talk publicly about their cloud strategies and how much they spend, especially if it relates to a single vendor. Forbes asked 45 companies affected by the AWS outages – including McDonald’s, Toyota and Coinbase – whether they use multiple cloud vendors or were considering doing so, and whether the recent AWS outages had prompted them to change their cloud strategy.

Ride-sharing service Lyft previously made perhaps the boldest statement against Amazon after the most recent AWS outage turned off the Citi Bike stations it operates in New York and New Jersey, saying “we’re as frustrated as our riders.” Lyft, which had said it planned to “build redundancy” into its system, declined to comment further, or say whether it was considering moving to another cloud vendor.

When asked about whether the AWS outages had prompted a rethink of its reliance on AWS, a spokesperson for Toyota underscored the need for companies to review their strategies when the system fails, and that for larger companies, it “may mean a more complex build-out utilizing more than one cloud vendor.”

American Express, another AWS customer, echoed the need for access to multiple clouds. Evan Kotsovinos, American Express’ global head of infrastructure, wouldn’t say whether Amex was affected by the AWS outages, but says the company has resiliency built in across its network because it has agreements with multiple vendors, in multiple regions. Amex has been building out its relationship with Oracle, for instance.

“Different clouds have different strengths,” says Kotsovinos. “And so if you really want to get the maximum value out of the clouds, you’ve got to put the right applications in the right cloud.” Others, meanwhile, affirmed their loyalty to AWS, despite the outages. Atlassian, which runs all of its products on top of AWS, told Forbes that it is not considering other cloud vendors.

Atlassian CTO Sri Viswanath added that the company is unconcerned by the AWS hiccups. “Our engineering teams regularly war-games downtime scenarios,” Viswanath said in a statement. “So when the AWS outage happened, we had mitigation plans in place and were able to limit the overall impact to our customers.”

1Password, a password management company valued at $6.8 billion after a funding round this month, confirmed it uses a single AWS region, but said it offsets the risks of outages by encrypting its clients’ data locally.

“At the end of the day, our decisions are made based on best-in-class infrastructure providers, and our choices aren’t triggered by any single event,” 1Password’s CTO Pedro Canahuati said in a statement. And a spokesperson for Slack said “our strategy for cloud platform partners has not changed and we look forward to continuing our work with AWS.”

To be clear, Microsoft Azure and Google Cloud also encounter outages. In October, Azure customers were unable to access a suite of services for eight hours. And in November, company websites of Snap, Home Depot and Spotify and others were down after Google Cloud experienced an outage caused by a network configuration glitch. Outages also occur as a result of issues with edge cloud services, which often provide “last-mile” connections from the vendors, such as Akamai and Fastly.

And a major migration to multi-cloud environments – where large companies use more than one vendor – has been underway since 2019, a movement accelerated by the pandemic, which forced companies to outsource their networks as their employees worked from home. A survey by cloud-research firm Futuriom published in October found that 55% of large companies were currently using two or more cloud vendors, while 83% were assessing multi-cloud networking.

Amazon’s efforts to keep cloud customers loyal has been increasingly suffering from the perception it may compete with them. Capital One, among AWS’ largest clients, announced at the annual AWS re:Invent conference in November 2020 that it was “going all in on the cloud” by closing all of its data centers and had migrated its networks to AWS. But Capital One told Forbes it has signed agreements with other cloud vendors, which it says it leverages “for niche use cases.”

Given Amazon’s lofty ambitions in the financial services sector, Capital One’s niche agreements with other vendors are likely to grow, says Steve Mullaney, the CEO of Aviatrix, which helps companies including Capital One manage multiple cloud environments. “What’s in your wallet?” Mullaney says, echoing the bank’s tagline. “Well, guess what: Maybe an Amazon card.”

For now, the outages are the most recent reminder for large corporations of the risk of relying on one cloud, Mullaney says. The AWS outages were “gasoline on the fire,” Mullaney says. “The last remnants – the laggards – it probably accelerated those people” to go multi-cloud.

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I’m a staff reporter at Forbes covering tech companies. Follow me on Twitter at @davidjeans2 and email me at djeans@forbes.com

Source: Amazon’s Devoted Cloud Customers Face A Decision After Outages: Leave, Stay Or Diversify?

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Amazon Funds Its Empire By Squeezing Its Marketplace Sellers

Amazon has always presented its Marketplace, where outside businesses sell products through Amazon’s platform, as one of its biggest success stories: mutually beneficial to Amazon, sellers, and customers alike. But a new report says those benefits are increasingly lopsided — in Amazon’s favor.

The report, which comes from the nonprofit Institute for Local Self-Reliance (ILSR), asserts that Amazon takes a larger and larger cut of sellers’ earnings through the various fees it levies on them. These fees have become so lucrative for Amazon that they now represent the company’s most profitable segment as well as its fastest-growing revenue stream, according to ILSR. And because sellers are paying Amazon high fees, customers may face inflated prices, even when they shop beyond Amazon’s borders.

“Amazon is the only winner here,” Stacy Mitchell, ILSR co-director and author of the report, told Recode. “It’s exploiting its monopoly power over these small businesses to pocket a huge and growing cut of their revenue.”

You might consider this to be a good business strategy on Amazon’s part, as it’s certainly paid off for the company. And some sellers on Amazon’s platform say they’re happy with the arrangement — at least, for now. But a growing number of others argue that Amazon’s dominance over the e-commerce market and its power over its sellers has given rise to anti-competitive practices that hurt Amazon’s competitors, competition in general, and consumers.

“Amazon’s dominance is bad for businesses, jobs, and America’s competitiveness,” Rep. David Cicilline, chair of the House Judiciary Antitrust Subcommittee, told Recode. “This important study makes clear that Amazon is crushing sellers through abusive policies that make it nearly impossible for everyday businesses to get ahead.”

These are some of the same issues identified by regulators and lawmakers who have accused Amazon of abusing its market dominance. They say it’s further evidence that action must be taken to curb Amazon’s power — and some of them are already working on legislation.

“It is important to understand how tech platforms can exploit their power to hurt small businesses and raise prices for consumers,” Sen. Amy Klobuchar, chair of the Senate Judiciary Antitrust Subcommittee, told Recode. “This report highlights how Amazon’s tactics can lead to that result and why Congress must act to set clear rules of the road for the digital giants that dominate our online economy.”

Amazon disputes the report’s findings, calling it “intentionally misleading” for lumping its mandatory fees and optional services together as “seller fees.” Amazon maintains that all of its fees — mandatory and optional — are competitive with what similar services charge, and that many sellers are successful without taking advantage of those optional services. But Mitchell says many sellers feel compelled to pay those ostensibly optional fees if they want their businesses to stay afloat.

Marketplace: The gift that keeps on giving (to Amazon)

Marketplace is a huge part of Amazon’s business. In his 2020 letter to shareholders, Jeff Bezos said it accounted for nearly 60 percent of Amazon’s retail sales, which come from nearly 2 million sellers. So when you buy a product on Amazon, chances are it was sold by an independent business using Amazon’s platform. Amazon isn’t providing that platform for free.

“The trade-off that any seller is dealing with is you get access to a huge audience, you get access to scale, the ability to scale your sales, but it comes at a cost to margin,” Andrew Lipsman, principal analyst at eMarketer, told Recode.

The cost to sellers is increasing every year, according to ILSR’s analysis, making business unsustainable for some sellers while Amazon’s profits grow.

The new ILSR report found that Amazon’s seller fees accounted for an average of 19 percent of sellers’ earnings in 2014. That’s almost doubled to 34 percent in 2021. And while seller fees accounted for 14 percent of Amazon’s entire revenue in 2014, that figure is up to 25 percent in 2021. Amazon will pull in $121 billion from seller fees alone, ILSR estimates.

That revenue translates to a lot of profit — more than even Amazon Web Services (AWS), Amazon’s cloud computing platform typically believed to be the company’s most profitable arm. AWS netted $13.5 billion in 2020, according to Amazon’s financial data. ILSR estimates seller fees netted $24 billion. (Amazon says these figures are inaccurate but did not provide its own; the company’s public earnings statements also don’t combine seller fees in this way.)

“Everyone thinks AWS generates all of Amazon’s profits,” Mitchell said. “But in fact, Marketplace is this massive tollbooth that gushes profits.”

Seller fees primarily come from three things: sales, fulfillment, and ads. Every item sold is subject to a referral fee, which is Amazon’s commission. Over the years, that’s stayed pretty consistent at 15 percent (it may be lower or higher, depending on the product category). According to ILSR, those referral fees made up the majority of seller fees as recently as 2017.

Since then, however, the majority of fees come from Fulfillment by Amazon (FBA), Amazon’s service that stores, packs, and ships sellers’ items to customers. Ad revenue is steadily gaining ground as more sellers pay for more ads to get prominent placement on Amazon’s site, including on product pages and search results.

Sellers who use FBA pay Amazon a fee based on the size and type of item they sell. Sellers also have to pay to ship items to and from Amazon’s fulfillment centers and to store them there. For some sellers, this might be a cheaper or easier option than doing it all themselves. Amazon says FBA’s pricing is competitive with similar fulfillment services if not cheaper, and sellers aren’t required to use it.

But help with logistics isn’t the only appeal of FBA for many sellers. Enrolling in the FBA program is the only way that most sellers can qualify for Prime. (Some sellers may qualify for Seller Fulfilled Prime, but it’s not accepting new enrollees at this time.) Getting that Prime badge is huge for a seller. Amazon shoppers — especially those 200 million Prime members — are far more likely to buy products that qualify for Amazon Prime. But that’s not only because they want to take advantage of the free shipping. It’s also because customers may not even see non-Prime offerings in the first place, thanks to the mechanics of the so-called Buy Box.

When multiple sellers offer the same item, Amazon’s algorithm picks one of them to be the default purchase on the product’s page. This is called “winning the Buy Box,” and when the customer clicks to add an item to their cart or to buy now, the seller who won the Buy Box is the one who gets the sale.

Prime items are far more likely to win the Buy Box than non-Prime items, and customers rarely click on that small “other sellers” link or the small “new and used” box where all the other listings are housed. This gives sellers a major incentive to pay for FBA, even if it costs more than taking care of the shipping themselves.

These FBA fees have been great for Amazon, which has dramatically expanded the logistics network that powers FBA as well as the number of sellers participating in the program. Five years ago, about half of Amazon’s top 10,000 sellers worldwide used FBA. By 2019, it was 85 percent. Amazon even offers a version of FBA for products ordered from other e-commerce services, including Shopify. Dave Clark, the CEO of Amazon’s consumer business, believes his company will be the largest delivery service in the United States by early 2022.

FBA aside, there are other ways sellers are paying Amazon more and more in the hope of generating sales. Amazon has been making a big push into digital advertising recently, and seller ads are part of its strategy. Critics have accused Amazon of increasing the number of sponsored slots in search results to increase ad inventory, and of charging more for the ads in them. (Amazon says the number of ads varies, and pricing is determined by an auction.)

Because of this, some sellers feel like they’re paying more and getting less. Amazon itself says these ads increase product visibility, which can translate into more sales. But that also means less visibility for the products in organic search results that earned their placement through strong sales and positive reviews. Sellers are already competing for this space with Amazon’s own products, and that competition might not be fair, as Amazon reportedly ranks its own products above others that had higher ratings. (Amazon has disputed these reports and says its ranking models don’t take into account whether the product is made by Amazon or offered by a third-party seller.)

Either way, many sellers increasingly feel pressure to buy ads just to get the same search placement (and sales) they once got for free. In a statement to Recode, Amazon maintained that FBA and ads are not mandatory and that sellers may find them beneficial.

“Sellers are not required to use our logistics or advertising services, and only use them if they provide incremental value to their businesses,” an Amazon spokesperson said.

How sellers’ problems affect your wallet

If you’re not a seller that relies on Amazon to survive, you might not see how any of this affects you. If you’re an Amazon customer, you might even think that this system is ensuring that you can buy products at the best price. But you might be wrong.

“Whether you shop on Amazon or not, you are paying higher prices because of its monopoly power,” Mitchell said.

When sellers have to raise their prices to account for Amazon’s increased fees, they often pass those costs along to the customer. And, thanks to Amazon’s fair pricing policy, sellers have to offer the same price on other platforms that they do on Amazon — even if their costs to sell on those platforms are less. If they don’t, Amazon may suspend or demote their listings. Sellers don’t want to take that risk, which could be potentially devastating to their business.

This policy could mean that, as sellers adjust their prices to account for Amazon’s fees, prices end up being higher elsewhere, too. It also makes it harder for other e-commerce platforms to compete with Amazon and challenge its market dominance, since they aren’t able to offer lower prices that would attract more customers. The lack of options means sellers are basically stuck with Amazon if they want to reach its exponentially larger and loyal consumer base.

Sellers have helped Amazon grow to own 40 percent and 50 percent (depending which report you cite) of the e-commerce market in the United States, and in some product categories, its share is far higher. Its closest platform competitor, Walmart, has just 7 percent. Amazon is often the first place online shoppers look for products — even before search engines — especially if those shoppers are Prime members. A large, established company can pull itself out of Amazon, as Nike did in 2019, and still do fine. Most businesses don’t have that luxury.

“Small businesses don’t have other options when it comes to the digital economy,” Rep. Ken Buck, the ranking member of the House Judiciary Antitrust Subcommittee, told Recode. “Amazon continues to use their monopoly power to crush competition.”

One solution is for lawmakers and regulators to step in. Some are trying: The European Commission announced last year that it is investigating whether Amazon gave preferential treatment to itself and sellers that used FBA when determining who gets the Buy Box. The fair pricing policy and its potential to inflate prices across the internet is the basis of the District of Columbia’s lawsuit against Amazon, as well as a class action lawsuit filed by Amazon customers last year.

Several members of Congress — Buck, Cicilline, and Klobuchar among them — have introduced bills that would forbid some of Amazon’s practices they believe to be anti-competitive. These bills came out of a 16-month-long House antitrust subcommittee investigation into Big Tech companies, including Amazon. The committee accused Amazon of luring in customers and sellers with artificially low prices and Prime memberships that the company loses money on, only to raise rates as soon as Amazon’s market dominance was assured.

The proposed legislation would forbid Amazon from giving its own products prominent placement, unless it earned that place organically, and from requiring sellers to pay for ads or services like FBA in order to get preferred placement. One bill would forbid Amazon from competing in a marketplace it also owns, and could force Amazon to split off into a first-party sales company and a company that operates a platform for third-party sellers.

Amazon has responded to all of this by denying that such measures are necessary or that it’s doing anything wrong. The company has become one of the biggest lobbying spenders in the country, and it’s been emailing select sellers to warn them that pending antitrust legislation could make it difficult or impossible for them to sell their products on Amazon.

After years of studying Amazon’s business practices, Mitchell, of ILSR, thinks the best solution is arguably the most drastic.

“Policymakers could regulate Amazon’s fees — basically accept it as a regulated shopping monopoly, like a utility,” she said. “But I think a much better, more market-oriented approach is to break it up by splitting Amazon’s major divisions into stand-alone companies.”

Source: Amazon funds its empire by squeezing its marketplace sellers

 

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“The Big Four of Technology”. October 31, 2017. Retrieved May 16, 2019. Rivas, Teresa.

“Ranking The Big Four Tech Stocks: Google Is No. 1, Apple Comes In Last”. http://www.barrons.com. Retrieved May 16, 2019.

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“Accelerated Growth Sees Amazon Crowned 2019’s BrandZ™ Top 100 Most Valuable Global Brand”. http://www.prnewswire.com. Retrieved May 25, 2020.

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Nasdaq To Move Markets to Amazon’s Cloud

Nasdaq Inc. said that next year it plans to begin moving its North American markets to Amazon. com Inc.’s Amazon Web Services cloud-computing platform.

The move, which will take a phased approach starting with Nasdaq MRX, a U.S. options market, involves turning over massive amounts of the exchange operator’s data to a third-party cloud service. Nasdaq didn’t disclose a timeline for moving its other markets.

Nasdaq’s ambition is to become “one hundred percent cloud-enabled,” Adena Friedman, the company’s chief executive, said in announcing the move Tuesday at an AWS industry conference in Las Vegas. “We will follow with more of our markets as we work closely with clients,” Ms. Friedman said.

Nasdaq has previously said that all of its more than 25 markets will be hosted in the cloud within the next decade.

They include six equity markets in North America, including the Nasdaq Stock Market, as well as six equity derivative markets, the Nasdaq Baltic and Nasdaq Nordic markets, and fixed-income and commodity markets.

The financial-services sector has been slower to adopt cloud computing than other industries, stemming in part from the tight regulatory oversight of banks and exchanges, as well as concerns over breaches of sensitive client data.

“To the extent that they don’t disintermediate their trading partners and investors, moving to the cloud gives exchanges greater flexibility, as well as enables more people to connect, enables people to connect easier,” said Larry Tabb, head of market-structure research at Bloomberg Intelligence.

Earlier this month, CME Group Inc. and Alphabet Inc.’s Google struck a deal to move CME’s core trading systems to the cloud.

Nasdaq already stores billions of transaction records in a data warehouse operated by AWS, including daily orders and quotes transmitted by traders. Over the years, the company has migrated a number of services to AWS, including its revenue management system for the U.S. and European markets. Its existing relationship with AWS is a big reason Nasdaq said it chose the Amazon.com unit to host its markets.

“We have had a longstanding relationship with them,” said Brad Peterson, Nasdaq’s chief technology and information officer.

Cloud systems and apps are hosted on data centers operated by third-party providers, including tech giants such as Amazon.com, Microsoft Corp. and Alphabet Inc.’s Google. The systems enable users to rapidly scale computing needs, based on demand, with far greater ease than in their own data centers.

Mr. Peterson has credited cloud systems for keeping Nasdaq from suspending trading in January, when a frenzy for shares of GameStop Corp. and a handful of other companies flooded popular online brokerages, caused a spike in market volatility and forced many operators to restrict access to trading.

He said moving markets to the cloud has the potential to provide the exchange with more security, greater reliability and better scalability, or the ability to quickly power up computing resources. Nasdaq and AWS could also create new cloud-based products and services for Nasdaq’s customers, Mr. Peterson said.

Scott Mullins, head of world-wide financial services business development at AWS, said Nasdaq’s growing use of cloud systems is driven by a need for elasticity and resilience to handle market volatility, along with hundreds of billions of trading events every day. “If you’re doing that on customized hardware, you’re going to have to guess what your capacity needs to be,” Mr. Mullins said.

The two companies have been working together to build out Nasdaq’s cloud-based capabilities since about 2012, Mr. Mullins said. “If you get a bill from Nasdaq today, it’s coming from a data lake sitting in AWS,” Mr. Mullins said.

“We’re only going to do it at a pace that works for us, AWS and our clients,” said Tal Cohen, executive vice president and head of North American markets at Nasdaq.

Ms. Friedman said the move announced Tuesday centers on the exchanges’ matching engines, systems that connect buyers and sellers and handle a vast number of price quotes and trades, many submitted by high-speed trading firms accustomed to having the exchange’s systems process orders in millionths of a second.

Mr. Peterson said that in the first phase of the move, Nasdaq’s primary data center for its U.S. equities and options markets in Carteret, N.J., will be expanded and AWS will install computing resources there. Traders will be allowed to connect their servers to AWS servers the same way they currently connect to Nasdaq’s servers, he said.

By: John McCormick & Angus Loten

Source: Nasdaq to Move Markets to Amazon’s Cloud – WSJ

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The Pandemic Has Shined a Light on the Importance of IT and The Cloud

At the beginning of the pandemic, Blackboard, an EdTech company, was faced with a 3,600% increase in demand for their virtual classroom. Zoom, a video communications company, went from 10 million users to 300 million. Vyaire Medical, a respiratory device maker, saw demand increase from 30 units per week to almost 1,000 per day.

In addition to the hardworking people and supplies required to meet these unprecedented demands, companies have relied heavily on their IT infrastructure, including compute, storage, and analytics, to power through the pandemic. Cloud computing, in particular, has helped these organizations manage the challenges of agility, cost, and scale.

Most people don’t think about things like compute that often. But as the VP of Amazon EC2, a web service that provides compute capacity at Amazon Web Services (AWS), I think about it a lot. And during the pandemic, I’ve seen a major shift in organizations moving to the cloud and a mental shift in how they think about their IT department.

Cloud economics

With cloud computing, organizations get pay-as-you-go, on-demand access to virtual computers on which to run their applications. Instead of buying, owning, and maintaining physical data centers and servers, they pay for infrastructure as they consume as a variable expense, at a price lower than virtually any company could achieve on its own.

In the cloud, organizations can provision thousands of servers in minutes, as opposed to the months it would take to get a server up and running on premises. So when an organization, like the ones I mentioned earlier, experiences a sudden and unexpected increase in demand, they can quickly scale up. Alternatively, if business is slow, they can reduce capacity just as easily so that they don’t have to pay for something they aren’t using.

In addition to compute, organizations can access many other services in the cloud. In fact, at AWS we have over 200 services—from infrastructure technologies, like compute, storage, and databases, to emerging technologies, such as machine learning (ML) and artificial intelligence, data lakes and analytics, and the Internet of Things (IoT).

The new role of IT

Because of the pandemic many organizations have found themselves in uncharted territory, and it’s their IT leaders they’ve turned to for direction: How can we scale to meet demand? How can we save money while business is slow? How can we set up thousands of workers with remote access?

In the past, many organizations viewed their IT department as a support function—order takers. But with the emergence of disruptive technologies, such as ML, IoT, and serverless computing, IT leaders are getting their seat at the table. Now, more than ever, they have a huge hand in an organization’s success and planning for its future.

Even though the pandemic isn’t over yet, most organizations have adjusted to the new normal. That’s what makes now a great time to rethink, reimagine, and innovate with a stronger partnership between the business and IT.

The right tool for the job

A good partnership with IT will reveal to a business the vast amount of tools available to them as they reimagine how to create stronger business continuity and a lasting competitive advantage. But the truth is that an organization can start creating a meaningful impact by focusing on something as basic as compute.

At AWS, we have the broadest portfolio of compute options. As a result, our customers can customize their compute for each of their workloads, such as ML or high-performance compute, to get the best price and performance.

For example, NextRoll cut their compute bill in half by switching to one of our newest-generation instance types powered by our custom-built Graviton2 processors. The low price is made possible by our unique architecture, which offloads virtualization functions to dedicated software and silicon chips that we manufacture ourselves. This also allows our customers to innovate faster with performance that is indistinguishable from dedicated physical servers.

Or another example is how GovChat, South Africa’s largest citizen engagement platform, in just a few days created a chatbot to help citizens find their closest COVID-19 testing center using our serverless computing option, which is optimized for speed and scale.

A resolution for the new year

From what I’m hearing, organizations are ready to reinvent in the new year and they want IT to be a bigger part of that conversation. Many organizations reach out to AWS when they want to get that dialogue started because we’ve helped millions of organizations, from Fortune 500 companies to governments to startups, reinvent themselves.

To learn more about AWS Compute Solutions, click here.

To read all the pieces in our “Reinventing with the cloud” series, click here.

By: David Brown, VP, Amazon EC2, AWS

Source: Paid Program: The Pandemic Has Shined a Light on the Importance of IT and the Cloud

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Related Contents:

Seltzer, Larry. “Your infrastr

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