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AWS chief Andy Jassy says it's 'really easy to cut prices'

Key Points
  • The AWS CEO pointed to several start-ups that have grown up on AWS, including Pinterest and Slack.
  • In 2018, AWS recorded revenue growth of 47 percent, up from 43 percent a year earlier.
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Amazon Web Services CEO Andy Jassy said that it's fairly simple to lower the costs of various public cloud tools that it offers to customers.

Pricing is a big part of the battle as Amazon goes up against big technology companies like Alibaba, Google and Microsoft, in the public cloud market. Companies moving storage and workloads to the cloud often spend a significant percentage of their operating expenses on infrastructure.

"It's actually really easy to lower prices," Jassy told Jim Cramer on CNBC's "Mad Money" on Thursday. "It's much harder to be able to afford to lower prices." In the past decade, AWS has cut prices 70 times, he said.

Other key areas where Amazon tries to stay ahead of the competition include geographic reach and the variety of tools that are available.

"We're much more focused on the long term than most companies," Jassy said. "We are trying to build a business and a set of customer relationships that outlasts all of us. And as such, we think if we help our customers get more done and are successful on their own, even if it means lower margin percentages, over time we'll drive more absolute margin dollars, and they'll be more successful, and we'll ultimately be more relevant."

Jassy pointed to start-up companies that have grown up on AWS, such as Airbnb, Lyft, Pinterest, Robinhood and Slack.

"I remember in 2007, 2008, when we had the recession, there were all of these very gloomy emails sent from a lot of venture capitalists, saying, 'Don't expect to get funded,'" Jassy said. "But actually, the number of start-ups kept growing, because as opposed to having to go raise money to pay for data centers and servers, people can try several instantiations of their idea on top of AWS.

"And if it isn't getting traction, you pay something like 80 cents a month or $1.50 a month, whatever your usage is. And so we have loads of companies that are trying to build businesses on top of us that really only pay anything meaningful when they have traction."

Pinterest spent around $190 million on AWS in 2018, The Information reported earlier this week.

Jassy said that Amazon itself is 88 percent finished with its wide-spanning migration off of Oracle database software and onto existing AWS technologies, and that the work will be complete later this year.

"We started the company at a very early stage, and we had Oracle, and it takes work to actually move away from Oracle," Jassy said. "Lots of customers are learning this, as so many people are trying to move away from the commercial-grade legacy database providers like Oracle or [Microsoft] SQL Server to newer engines like Aurora."

The core AWS services — EC2 for remotely performing computing tasks and S3 for data storage — came out in 2006. AWS now has 165 different services available, Jassy said.

AWS has become a crucial part of Amazon's overall business. In 2018, the unit generated $25.66 billion in revenue, or 11 percent of Amazon's total sales, up from 10 percent of overall revenue in 2017. Growth at AWS accelerated to 47 percent last year from 43 percent in 2017.

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