Amazon – more than books and music

February 21, 2008 from Baseline – “By stepping beyond its circumscribed sphere of selling books, toys, music, DVDs and computers online, Amazon is not just poaching far from its own turf by penetrating an entirely new market, it’s also challenging the established players in the emerging software as a service (SaaS), managed services and grid-computing sectors. It’s as if General Motors suddenly opened up its factories worldwide to allow thousands of companies to make their products using its equipment and facilities…

This past holiday season, Amazon’s e-commerce site handled customer orders for a whopping 5.4 million items on Dec. 10th alone—more than 60 items per second. Its fulfillment network shipped 3.9 million units in a single day. Nintendo’s Wii game systems flew out the doors at an incredible clip—17 per second—when the coveted games were in stock.

Amazon’s e-commerce success hasn’t gone unnoticed on Wall Street. The company’s shares last year soared 135 percent, fractionally better than tech darling Apple’s and nearly three times the stock-value growth of search juggernaut Google.

Both revenue and profit spurted last year, with sales up 39 percent (from $10.7 billion in 2006 to $14.8 billion in 2007), and net income up 150 percent (from $190 million in 2006 to $476 million in 2007). Although its Web services foray has yet to be viewed as a major revenue contributor, Amazon’s computing-services revenues range from $46 million to $92 million, analysts estimate.

Unlike conventional software vendors that must build vast data centers to get into the SaaS business, Amazon is tapping its existing—and often underused—infrastructure. “Amazon has a lot of capacity that sits idle for a lot of the year,” AWS’ Selipsky says. It’s as if a thoroughbred racehorse, restricted to running in cheap claiming races for 50 weeks of the year, suddenly was spurred on to compete in the Kentucky Derby.

Amazon has long been hip to the idea of making a buck off its various e-commerce systems. Nearly one-third of Amazon’s revenue comes from third parties, such as merchants that use its various technologies. “This is a multibillion-dollar business for us,” Selipsky says.”

180 View – The article is interesting in Amazon’s eCommerce metrics but also in the direction the company is taking. Amazon and other companies will provide both the hardware and software and we will pay as we need it.