It’s difficult to declare that a $100 billion company is at a turning point in its history, but Amazon Web Services—the company’s cloud division and the uncontested leader in the cloud infrastructure industry—is.
On Tuesday, the company announced that CEO Adam Selipsky was stepping down to spend more time with his family and recharge a bit, according to his statement. AWS alum Matt Garman will take his position.
Although growth has slowed across the industry, as the space has settled into a more mature state, growth for the cloud division has slowed pretty dramatically during Selipsky’s tenure, falling from 33% in Q2 2022 to 12% in Q2 and Q3 2023 before ticking up to 13% and 17% in its two latest reports. Nevertheless, generative AI is causing a significant disruption to the core infrastructure industry just as it seems to be maturing.
Both Selipsky and Garman worked for the firm for a long period; Selipsky left to become CEO of Tableau for five years before coming back to oversee AWS in 2021. Garman has worked for the firm for his whole career, progressing from an Amazon intern to an AWS product manager to CEO in almost 20 years.
Tracy Woo, a Forrester analyst, believes it is past time for a change. It is not a surprise that Selisky is leaving. While he was president, AWS grew more slowly. She added that the generative AI trend caught AWS off guard, placing them third among hyperscalers in AI—uncharted territory for them.
According to Constellation Research founder and lead analyst Ray Wang, the timing is ideal, even though Selipsky was instrumental in maintaining stability at AWS throughout Jassy’s transition from AWS CEO to CEO of the entire firm.
As we approach the age of AI, consumer expectations are still high, and morale has not been the greatest. This positions Matt Garman well to advance AWS, Wang said at Eltrys.
The market impression is that AWS lags behind Google and Microsoft in generative AI, which Garman has to overcome. Synergy Research reports that although Azure has been rising steadily, reaching 25% in the most recent quarter, up 4 percentage points since the end of 2021, AWS has been constant at roughly 33% share throughout the years. This is partly because Microsoft seized the AI technology wave quickly thanks to calculated investments and acquisitions like OpenAI and Inflection AI.
Rudina Seseri, the founder and managing partner of Glasswing Ventures, stated that they will evaluate Garman based on his ability to steer the business through these changing market conditions. “AWS has long controlled the cloud market share, but Garman is coming into the role with a few special difficulties,” Seseri told Eltrys.
After eliminating egress costs, “cloud platforms will also need to create stronger product ecosystems to retain customers and stay competitive beyond price,” she said.
The question is whether AWS should focus on pure infrastructure and platform capabilities or compete directly with Google and Microsoft at the big language model level. According to Forrester analyst Lee Sustar, this is the primary strategic dilemma facing AWS at the moment.
Thanks to the Microsoft/OpenAI partnership, Azure now has the initiative to provide AI services and AI-enhanced versions of its current offerings, although AWS continues to hold the majority of the market. That begs a strategic challenge for AWS: should they follow Azure’s lead by advancing up the technological stack or maintain their very effective “go build it” strategy?
Perhaps answering Sustar’s query, IDC analyst Rick Villars believes that the corporation should invest in data infrastructure. Indeed, the introduction of Amazon Bedrock the previous year could have set the stage for such a strategy.
Similar to the challenges businesses faced with ERP in the 1990s, e-commerce in the 2000s, and then mobile, I predict that data will emerge as the next major burden. This is the next significant investment, he added, and he believes that with Garman at the helm, AWS is well-positioned to attack that market.
