For the first time this week, Amazon disclosed how much revenue Amazon Web Services will eventually realize from multiyear cloud contracts, giving a slightly clearer picture of how companies are paying for the cloud.
Amazon’s quarterly filing with the SEC revealed that it will eventually recognize $12.4 billion “primarily related to AWS” over the next few years as it works its way through contracts that originally specified a relationship lasting longer than a year. It’s not exactly clear what “primarily” means, but it’s safe to assume a sizable chunk of that revenue was driven by Amazon’s most profitable division. The company also disclosed that the weighted average remaining life on those contracts is 3.2 years.
It’s not particularly surprising that AWS is pursuing multiyear contracts as it grows into the most influential enterprise technology supplier to emerge from the cloud computing era. Sure, AWS grew to prominence on the backs of startups, but some of those startups are now pretty big businesses with the confidence to sign new multiyear deals, and more and more enterprise customers are signing deals with the company.
There are also lots of reasons why it makes sense to lock in a cloud deal for multiple years. Simply moving workloads to the cloud can be a multiyear process itself; it took Netflix seven years to go “all-in” on AWS, it said in 2016. It’s also easier to negotiate discounts if you’re willing to give a vendor several years of your business.
Still, having $12.4 billion (or thereabouts) just waiting in the wings is yet another sign of the cloud leader’s position in the market, which accelerated during the last quarter. During 2017, AWS recorded $17.5 billion in revenue.
BY TOM KRAZIT on May 10, 2018 at 2:16 pm