Amazon Web Services: Good Cloud Revenues, Great Cloud Margins?

Some pundits say services, rather than hosting infrastructure itself, is where the money is when it comes to the cloud. But now some analysts are suggesting infrastructure as a service (IaaS) cloud pioneer Amazon Web Services may not be killing it on revenue, but they’re making cloud margins that hover around an estimated 50%. Here’s the scoop.

First, a tip of the hat to RedMonk’s Stephen O’Grady, for calling our attention to the analyst predictions and his own insights.

As O’Grady points out, Amazon Web Services’ projected revenues of $500 million isn’t that impressive considering Microsoft spends roughly that amount just to build a data center. IaaS has historically been perceived as a poor market to be in -- the thinking is that it’s hard to add value when only selling the building blocks for a service, and that any money made is in volume.

But analyst firm UBS says Amazon Web Services’ gross margins for 2006 through 2014 will gradually rise from 47% to 53%. Even accounting for analyst spin and the inherent unreliability of predicting future market conditions, that’s serious business.

So if people are migrating to the cloud with increasing speed, boosting sales volume -- and if margins on basic infrastructure needs are better than anyone thought, at least at Amazon Web Services -- it might mean the cloud is finally ready to make good on all the opportunity and potential it represents.

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