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Amazon acquisitions hone in on emerging tech

AWS' acquisitions of NICE, Elemental Technologies and Cloud 9 hint at a pattern of small, service-focused buys. If AWS opens its wallet again, here's how it could spend.

A look at two recent Amazon acquisitions show a pattern: Each AWS purchase aims at tactical -- but less expensive -- companies to shore up any gaps it may have in the market. And there are not many gaps.

In February, Amazon acquired Italian software as a service company NICE, which develops products to help customers centralize high-performance computing and visualization workloads. In September of 2015, Amazon acquired Elemental Technologies, a back-end mobile video service that AWS used to strengthen cloud infrastructure services, for $500 million.

The questions for the near future are: How will AWS continue to expand its portfolio through acquisitions? And how will Amazon acquisitions affect AWS customers? There seem to be both macro and micro factors in play.

AWS is making tactical acquisitions -- choosing to build most of the cloud services that it put into play. For instance, AWS acquired San Francisco-based startup Cloud 9; its technology provides an integrated development environment (IDE) for web and mobile developers to collaborate. AWS likely will roll the technology into its infrastructure as a service offering without adding or replacing any major services. Think of AWS' purchase strategy as adding value to your house through small changes, such as a new floor or a new patio door.

But these are not multibillion-dollar deals. Amazon acquisitions tend to be smaller deals intended to shore up AWS' existing portfolio. This strategy contrasts with that of Oracle, Microsoft and IBM, which choose larger plays. IBM purchased SoftLayer a few years ago, and Oracle is in the midst of acquiring NetSuite.

AWS is making tactical acquisitions -- choosing to build most of the cloud services that it put into play.

The micro patterns are even more telling. If you follow past micro patterns, AWS likely will purchase companies that will help move it into new or underutilized markets. The following categories are potential AWS purchase targets:

  • IoT startups. This could include companies that provide niche tools, such as sensor management and database connectivity. Count on these to be startups; many won't have much income, but will have innovative ideas and technology.
  • Cloud management. This could include companies that have figured out some aspects of management and governance, which would fit in nicely with native AWS utilities. In some instances, these tools also could provide capabilities to manage AWS public cloud competitors.
  • Developer productivity and DevOps. AWS has a good start on DevOps, and it seems to support developers to the point that it's driven growth of the company. Count on some buys here. Again, these will be smaller, tactical players with a focus on innovation and with quick assimilation.

That's a pretty full shopping list for AWS, but it's a different list than what the larger players have. So there shouldn't be any overlap. Prices for Amazon acquisitions could be low -- less than a billion dollars for most of its buys. And AWS will continue with its build vs. buy strategy, which seems to be working thus far.

Next Steps

Where is AWS going in the next 10 years?

IDE addition on horizon for AWS

AWS acquisition expands mobile development

This was last published in October 2016

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Conference Coverage

Your passport to AWS re:Invent 2016

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Which cloud technology company should AWS attempt to acquire, and why?
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Container technology should be on the center of AWS radar given it is slowly but surely replacing the virtualization engine underneath the covers.  Given AWS works already on a 2-3% margin, moving to containers can potentially get the margin higher or better yet push the capex down.
Containers - when run optimally provide for best of both worlds - VMs and bare-metal.  AWS could also consider diverting some of it’s service to bare-metal cloud which would come in handy as more and more big-data and BI moves to the cloud and requires so much more juice…
Having said that, lets not get confused with CaaS but a larger picture set for the datacenter focused on Applications where containers are means to an end.
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