Amazon’s Evolution Business Essay

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Amazon’s Evolution Business

XBIS219: Amanda Pervis

Axia, University of Phoenix

02/17/2013

Amazon has long ago achieved its position of being the largest online retailer with outstanding retail sales. However, while Amazon may be the largest existing online retailer, the company has failed to show consistent profit growth, and profits have actually fallen in recent times. Additionally, Amazon is facing increased competition from other websites such as Google. By 2007 Amazon had invested over a decade of time and about $2 billion to construct one of the most reliable and efficient online stores in the world. However, at any time Amazon only uses about 10 percent of its processing capacity; so the question arises, what could be done with the unused storage and processing power. Amazon decided the answer is to offer a combination of storage, computing, and other services to make its infrastructure available to companies and individuals (Rainer & Turban, 2009). Nevertheless, is this shift away from Amazon’s core competencies a good business decision?

The strategy

The decision by Amazon to begin offering its unused processing power and data storage capabilities seems like an obvious choice. The company had unused resources that could be used to increase profits; however, it is a departure from its core competency of being the largest online retailer and its goal to revolutionize online retail. The strategy to use Amazon’s unused processing power to provide services such as computing and storage available to other companies to help them run the technical and logistical aspects of their businesses seems like a logical choice by Amazon. While all business decisions carry some level of risk, this decision by Amazon seems to be appropriate and sound based on the current competitive environment. Offering these services provides Amazon with multiple revenue streams to ensure its continued success.

Components

Amazon uses their Simple Storage Service (S3) to allow businesses to store applications and data on Amazon disk drives, thus reducing the need of businesses to purchase physical storage, or build data centers. Amazon charges a certain price per gigabyte per month so the companies that choose to use the service only pay for what they are actually using, instead of paying for data centers, which may not be fully utilized (Rainer & Turban, 2009).

Amazon’s Elastic Compute Cloud, or E2C, is a service in which Amazon leases processing power to companies for a fixed rate per hour. This service reduces or eliminates the need for smaller companies to purchase powerful servers. E2C allows companies to reduce the cost of processing power needed for various tasks, such as backing up data, by allowing the companies to purchase the amount of processing power they need at any given moment (Rainer & Turban, 2009).

The Mechanical Turk service combines processing power with networks of individuals who are paid to perform various tasks that computers cannot do efficiently. These tasks include things such as locating inappropriate
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