Amazon's most profitable business has already been running in Australia for years

Amazon Australia fulfillment centre in Melbourne. (Photo by Robert Cianflone/Getty Images)

Amazon is gearing up to launch full retail operations in Australia any day now, but its most profitable venture globally has already been running in this country with many customers for several years.

“It’s an $US18 billion revenue run rate business, with a 42% growth rate in the last financials that we released. It’s a pretty healthy clip on a reasonable sized business. We have millions of active customers,” said Amazon Web Services chief executive Andy Jassy in Las Vegas.

Amazon Web Services is a cloud computing provider that has taken over as the most profitable division within Amazon. In fact, the last five quarters has seen it single-handedly cancel out the losses taken on by the retail arm.

In the quarter just ended in September, AWS globally racked up a $US1.2 billion operating profit to completely negate the $US936 million operating loss that came out of the e-commerce division.

And Australian companies have been customers for years.

Some of the publicly known customers include the Commonwealth Bank, Atlassian, Qantas, Fairfax Media, News Corp, Suncorp and Vodafone. Australian startups known to use AWS include names like Campaign Monitor, Freelancer, ZipMoney and Vinomofo.

The chances are, the typical Australian has used an online service that runs on Amazon without knowing it.

While Amazon will not break down client numbers in each country, a spokesperson said that Australia has “thousands of customers across all major industries including all major banks, larger government departments, industrial and media leaders, mining and resources and Australian startups”.

Amazon Web Services’ Andy Jassy. (Supplied)

Cloud computing allows a company to outsource their tech infrastructure needs, to avoid having to run its own data centres and servers. Amazon clinched first mover advantage in providing this outsourcing capability, launching its first public service in 2004 and relaunching the brand in 2006 – well before the term “cloud computing” was introduced into common parlance by former Google chief executive Eric Schmidt.

Microsoft and Google joined the race later, but sit far behind Amazon in market share with smaller product portfolios. Companies like IBM and Telstra have also tried providing cloud computing without much success.

While the service installed its first computer servers in Australia in 2012, local customers were using AWS long before that by outsourcing their infrastructure to Amazon’s USA, Asia or even European data centres.

Australia head of startup ecosystem Ian Gardiner said outsourcing computing infrastructure was initially attractive for startups because it could quickly start a business for very little outlay.

“You can launch a startup now with essentially no money,” he told Business Insider.

“It just means that when you’re going to get your first round of finance, you really have a product and hopefully some customers, maybe a team around it – but the cost to get to that point is now a credit card. Whereas the cost to get to that 10 to 15 years ago was maybe half a million [dollars].”

For a startup like Australian labour exchange marketplace Freelancer, which has operated its entire life in the cloud and just surpassed 25 million users this year, outsourcing its infrastructure to Amazon has a flow-on effect on the culture of the company.

“For us it helps not to have internal barriers [to new ideas]… The mindset that everyone in the company has is we have rapid releases [of new features], we try new technologies as they come out,” said Freelancer systems engineering manager Aman Bazayev.

“Just being open-minded to technology and new things that are coming, as opposed to having this friction internally.”

Business Insider spoke to multiple Australian companies and one common theme came out: outsourcing computing services allows even older businesses to behave like startups – by allowing new ideas to be turned into reality at speed and on the cheap.

“Qantas, Lion, HCF – they are progressive companies using cloud services a lot. A lot of the reason why they’re doing is because they need and want innovation. They need and want a cultural shift to try and convince their staff and organisation that that’s the way they have to move,” said Gardiner.

“What we’re trying to do is encourage more of that.”

For Australian marketing tech success story Campaign Monitor, its systems have to handle sending “billions” of emails each month with peaks and troughs – something that is far easier to dial up and down with outsourced computing infrastructure.

“We use close to 1000 [server] instances,” Campaign Monitor chief information officer Henry Wiputra told Business Insider.

“Black Friday, for example, we added about 20% resources on some services.”

The annual AWS re:Invent conference, on this week, attracted 40,000 people from around the world to Las Vegas this year, taking over 5 casinos with sessions and events.

Adoring fans saw Jassy deliver a keynote on Wednesday that announced, among many new features, a tool to allow anyone to develop machine learning capabilities without having expertise in the area. The company also introduced functionality to bring video image recognition and natural language processor within the reach of customers.

“One of best things about AWS is that you can just try it and it doesn’t cost much money. We have startup [assistance] programmes that we provide to these people as well – AWS credits, free training, engineering support,” said Gardiner.

“It really doesn’t cost them much money and they can launch something the scale of Netflix overnight, without having to pay for [resources] until they’ve used it.”

The journalist travelled to the US courtesy of Amazon Web Services.

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