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MSFT or AMZN?

Discussion in 'TSLA Investor Discussions' started by Nb1277, Apr 30, 2017.

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  1. Nb1277

    Nb1277 Member

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    In terms of other high-potential growth stories in tech, Microsoft and Amazon fit the bill. The question is which has more upside?

    The common thought is Amazon and I was inclined to agree prior to earnings last week. AMZN results were impressive and it's surely not done growing but the driver in each firm is cloud. AWS was up 43% which is quite good in absolute terms but compares to 93% Azure growth. Azure is presumably a smaller business (MSFT doesn't break Azure out from Commercial Cloud) but its not insignificant and may not be far from catching AWS.

    I like both stories but I need to pick one over the other (for now, at least). The faster pace of growth in Azure drew me to MSFT but it seems that market psychology is more of a tailwind for Amazon because MSFT's other businesses may hold the stock back. To be clear, MSFT's all around performance is good but their other segments aren't growing at the pace of Azure.

    Discuss.
     
  2. neroden

    neroden Happy Model S Owner

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    If you're making a cloud computing bet, for some reason Amazon has nearly half of the entire market. (This does restrict the possible growth: if they grow by 100%, they have the WHOLE market.) I don't personally understand why. But you *should* understand why before you consider investing on this basis. Anyone else know why?
     
  3. ggr

    ggr Roadster R80 537, SigS P85 29

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    The simplistic reason is just that Amazon started first, and got a good market share before anyone else thought about it. Also Azure is somewhat tied to Microsoft products, where Amazon will pretty much give you whatever environment you want.
     
  4. dennis

    dennis P85D

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    I view investing in AMZN as a bet on Bezos much more than a bet on AWS and the cloud. Like betting on Elon by investing in TSLA.

    While they were never visionaries IMO, Gates and Ballmer were ruthless competitors. Those days are over. Microsoft is a corporation.
     
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  5. jimmyz80

    jimmyz80 Member

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    This is somewhat misguided since the public cloud market is growing extremely rapidly. The current race is who can vacuum up as much of the new business as possible, as enterprises abandon their legacy data centers and migrate into the cloud.

    Pegging AWS at 50% market share would also probably be fairly conservative. Recent estimates have estimated AWS is 10x larger than the next 14 competitors combined (likely a technical metric instead of a financial metric though).

    Disclaimer: I work at AWS. :p
     
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  6. Ocelot

    Ocelot Member

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  7. dalalsid

    dalalsid Member

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    Not true about Azure being tied to MS products. I tried azure out a couple of years ago and you could run almost anything on it.
     
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  8. neroden

    neroden Happy Model S Owner

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    It didn't! Oracle and IBM and even Google were in the business well before Amazon. And Amazon beat them. Explanation?
     
  9. neroden

    neroden Happy Model S Owner

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    OK... I still want to know what AWS's market advantage is here. It clearly has a massive advantage over its competitors. Can you say the main reasons why people choose AWS over the alternatives?

    I'm at a disadvantage in understanding this. For security reasons, I would *never* trust my data to the "cloud" and would always have my own data centers; the same attitude holds in the military, the railroads, and other safety-critical industries; but obviously most industries just don't care.
     
  10. jimmyz80

    jimmyz80 Member

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    This is also a misconception. We have customers from every sector, up to and including intelligence agencies, governments, banks, stock markets, insurance companies, etc. The AWS security measures and audits are so tightly buttoned up that I've personally never seen a customer attempt to prove their security posture is better than ours. The only roadblocks I've ever seen put in place are either stubborn executives, or compliance auditors that just take their time and always end up approving the migration to AWS. You likely already have a ton of your personal, financial, and health information stored on AWS and don't even know it.

    Amazon is definitely not better at everything relating to the cloud, as I've seen a number of deals swing to competitors for specific niche services they may do better than AWS. But looking at the broader landscape of public cloud, AWS shares the same customer obsession that Amazon retail does. Part of my job is literally to get my customers on AWS to spend less! We give customers the tools they ask for, we help them to use these tools in the most cost efficient ways, we have a proven uptime and security record, and we continually drop prices as we learn to run our services more efficiently ourselves.

    So in a nutshell I wouldn't say that AWS has one specific advantage; rather they've painted a broad picture of being the best public cloud to consider for a wide range of reasons.
     
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  11. dakh

    dakh Member

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    Personally I think longer term game is taking advantage of the combination of customer data in the cloud and narrow AI to build out the next generation of tech. Sure there's the infrastructure to run all that but I think that will soon become a commodity market and we'd be back at WHAT you run not how. In crude terms, moving everything into the cloud can be viewed as simply another way to drive costs down, or it can be viewed, together with advances in AI, as an enabler for something fundamentally different.

    It's too early to call who is going to be making bank in that new world but Microsoft is very well positioned for that and is making good strides in the right direction.
     
  12. neroden

    neroden Happy Model S Owner

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    If Amazon itself is your threat, any other security posture whatsoever is better than AWS! Yes, I'm sure you've attempted to design AWS with suitable cryptography so that Amazon can't hack into client accounts, but Amazon can almost *always* make it go down.

    So-called intelligence agencies are.... mostly stupid. It's interesting to know that they're clients of Amazon, because it confirms my belief that Amazon is currently actually more powerful than most world governments and could bring governments to their knees if it wanted to.

    No, actually I really don't. You'd probably be surprised the degree to which I haven't put my personal or health information online at *all*.

    So I finally did some more research on so-called "cloud computing". Amazon describes three categories:

    Infrastructure as a Service
    It looks like if you pick this, you can just rip your entire business out of Amazon and put it on your own computers if you decide Amazon is causing trouble. It also looks like it's easy to have your own backups not under Amazon's control. Correct?

    Platform as a Service
    It looks like you can again fire Amazon and remove your entire business if the platform you're using isn't Amazon-specific, and keep your own backups on your own site.

    Software as a Service
    It looks like you can again fire Amazon and remove your entire business if the software you're using isn't Amazon-specific, and keep your own backups on your own site.

    They also describe On-Premises Infrastructure, which is basically contracting with Amazon to do your IT, nothing more. Here, Amazon *can't* shut you down even if Bezos makes a bid for world domination, which would make it suitable for mission-critical military applications.

    OK, I think I'm finally beginning to get the hang of the business. The core of "cloud computing" is basically contracting out your IT. With automatic rollover of services between hardware. This is... a lot less revolutionary than people have been advertising it as. Pretty pretentious actually. Cloud computing is a funny name for a combination of several things which were being done from day one of the Internet.

    Practically anyone could set up a cloud computing shop and now that I know what it is, I realize practically everyone has (they're just not all calling it that, which means measurements of market share may be wrong). There is some cost advantage to sheer server volume, so big organizations like Amazon and Google do have an inherent advantage.

    I do not understand why Amazon specifically has a lead in the market, but from what you've said it appears to be fundamentally a customer service thing. Customer service advantages can last for a long time, but they can also go bad so quickly it's not funny: you can lose 100% of your market in a year. As an investor, if you're a customer, you can analyze that. If you're not a customer, you can't. AWS did go down a few weeks ago, crippling an astounding number of businesses. Market share is fleeting.

    So thank you: you've reinforced my view that I should never invest in Amazon. It will probably do great, but I wouldn't *notice* if it was going bad. I'd have to be an AWS customer to notice.
     
  13. neroden

    neroden Happy Model S Owner

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    The second view is wrong. As someone said recently, the big mistake being made by many people is assuming that big data is useful.

    Big data has a massive GIGO problem, and has a needle-in-haystack problem on top of that. Statistics is hard, and we aren't good enough at it to teach computers to do it properly.
     
  14. dakh

    dakh Member

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    We're arguing if this can be made into an iPhone or it'll remain a tablet. From where I sit, which admittedly is an insider, definitely looks more like an iPhone. There's nothing big about the data when it's in the context of a particular person or organization with a specific time, location, and goals/needs. It's just that before "ambient context" of their situation was disjointed and unavailable to feed into some well trained narrow AI, and now it's potentially not.
     
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  15. dakh

    dakh Member

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    Ahem... No you're not. Yes there are organizations can host a bunch of boxes and keep their OSs patched in a data center built by a hydro power plant, it's not that difficult just kind of a PITA. But if done right it provides computing platforms that simply can't be matched by anything else within any reasonable money. It basically is the same as every other disruption lately: marginal cost of developing and hosting one more sophisticated application goes to zero. We're not quite there yet but hosting is going to zero and development cost is brought down substantially.

    But like I said above, personally I don't think that the meat in the sandwich, that's just firing up the grill.
     
  16. jimmyz80

    jimmyz80 Member

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    Not to sound ominous or anything, but: If you've ever been to a doctor, dentist, or hospital, you have medical records on AWS. If you've ever set foot in public, there are photos/videos/audio of you on AWS. If you own a mobile phone, pretty much every app on it (including many parts of the OS itself) run on AWS. Every time you push a button on your cable box remote, yup, AWS. The list goes on and on; it's pretty much impossible to exist today without part of your life being stored on AWS and/or decisions about your life experiences being made on AWS. It's not because AWS wedged itself into those positions or wants that data (99% of it is encrypted with keys from other businesses anyway); it's because AWS provides an attractive toolset that so many businesses have chosen to build their applications on and store their data in.

    It's not just a customer service thing either. During the most recent outage there were certainly some upset customers, but most saw the outage as a failure of THEIR engineers. They didn't take advantage of the tools AWS provides to run their applications across multiple geographic regions simply and easily. The AWS CTO is famous for flat out telling customers that "everything fails all the time”, and if you use AWS services according to best practices, you can avoid impact from these failures. The big AWS customers don't see impact from these outages that hit the news, since they run in multiple AWS regions, use global load balancing, etc.

    The reality is that it's mega expensive to pack up and move from one cloud provider to another. If you're just running virtual machines, sure then it's easy to pick up and move; but that's a legacy way of running IT, and those businesses aren't the big spenders in the public cloud world. The big spenders have their applications so integrated with a cloud vendor (think managed message queues, video encoding, data analytics, storage lifecycle management, facial recognition, machine learning, etc.) that they'd literally have to re-write the majority of their core business assets in order to move (Ie. Go back to day-1).
     
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  17. Nb1277

    Nb1277 Member

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    @jimmyz80 great information, nice to have an industry perspective. Out of curiousify, what's your role in the company? From one of the examples you mentioned sounds like a customer success position?
     
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  18. jimmyz80

    jimmyz80 Member

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    Thanks! Always happy to help folks to understand the weird world of cloud computing; it's fun stuff to work with.

    As corny as it sounds, everyone at Amazon is in a customer success position. They won't hire anyone unless they're more or less unanimously convinced that you'll put the customer's needs first. It's actually kind of fun when you catch someone not being helpful within Amazon, since you can lay the customer obsession guilt trip on them and they can't really sidestep it. :p

    But to answer your question I'm a Technical Account Manager. Basically I (and a partner) get assigned to a small handful of enterprise AWS customers, and our goal is to make sure their day to day operations go smoothly. It's a real mish-mash of stuff but a super flexible and fun role. Some days I'm the resident BGP expert for setting up WAN circuits and VPNs (ex Cisco Product Manager), and other days (like today) I'm tinkering with data warehousing and SQL to analyze mountains of customer usage data in an effort to find cost savings opportunities for them.
     
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  19. neroden

    neroden Happy Model S Owner

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    #19 neroden, May 2, 2017
    Last edited: May 2, 2017
    Those medical "records" are bullshit. Pure GIGO. I literally have to keep medical records on paper to have anything useful, and I'm not kidding here. I've started telling doctors to not bother to open up the medical records they have, and handing them copies of my *accurate* records. We would be better off if all the electronic medical records were wiped. I'm dead serious.

    The rest of the Orwellian tracking stuff... well, I have strong reasons to consider most of that GIGO too.

    OK, that's informative. Who *are* the big spenders?

    Got it, so these businesses -- the big spenders -- can, in fact, be deliberately shut down by Amazon at Amazon's whim. Amazon is a security threat to them.

    If I were a railroad or the military, I wouldn't be willing to do that, for obvious reasons, so it's clear that such safety-critical operations are not the big spenders.

    (P.S. There is no such thing as "machine learning". It's like "artificial intelligence". Anyone who uses such a phrase is being non-specific and not describing what they're actually talking about.)

    So what you're telling me is that this is an installed-base or compatiblity advantage. That's certainly more durable than a customer-service advantage. This sort of advantage is much more durable than it *should* be. The example there is Microsoft, who started producing genuinely crap software around 1990 -- stuff which should have actually been banned for its introduction of novel, never-before-seen security flaws -- but continued to make lots of money selling it for decades.

    Amazon is still making good stuff, of course -- I guess they're trying to not be Microsoft.

    But in business terms, Amazon is very much in a position to drive their customers' profit margins down and their own profit margins up using sole-supplier monopoly power, which is one of the things Microsoft did. That can be extremely profitable. It gets me back to the question of, why AWS rather than another cloud provider? What exactly is Amazon supplying which is so valuable that the big-spending businesses are willing to hang their entire business on Bezos's goodwill?

    Let me look at this list again:
    Managed message queues are not complicated; aren't there a dozen free pluggable implementations? Video encoding is trivial. Data analytics is cheap and quick to write, and is extremly badly overrated as well (I've commented on this before). Storage lifecycle management is straightforward, though I guess there may not be free pluggable implementations. Machine learning is a non-thing (what do you actually mean when you say that?). Who's spending billions on facial recognition, and why? I can't think of any business for which this is actually a core feature.
     
  20. jimmyz80

    jimmyz80 Member

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    You certainly make a lot of assumptions; have fun with your stock picks. :)
     
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