Business

Where the money is really made at Amazon

Andy Jassy, chief executive AWS Image copyright AWS
Image caption Andy Jassy heads up Amazon's most profitable division

Andy Jassy may not be famous like his boss Jeff Bezos, but he runs Amazon Web Services (AWS), perhaps the most important part of the Amazon empire.

AWS sells data storage and processing for companies that don't want the headache of running their own IT infrastructure. It's a business known as cloud computing and it has only been around 10 or 15 years.

Its rapid expansion means AWS supplied 70% of Amazon's profits in its most recent quarter.

In an interview with the BBC, Mr Jassy explained that the division began with start-ups such as Airbnb, Deliveroo and Pinterest, who built their businesses from scratch on top of AWS, but that in recent years more established firms have joined them.

Despite that success, the business is facing some real tests - not least fierce competition from Microsoft.

Tensions with US government

A big blow hit in October, when the US government awarded a juicy $10bn (£7.6bn) contract from the Department of Defense (DoD) to Microsoft.

Amazon's AWS had been expected to win the Joint Enterprise Infrastructure (Jedi) project. It is challenging the decision, saying there had been interference from the White House.

In a document made public in December, AWS explained why it was protesting against the Jedi contract award. "The question is whether the president of the United States should be allowed to use the budget of DoD to pursue his own personal and political ends," the filing stated.

"DoD's substantial and pervasive errors are hard to understand, and impossible to assess separate and apart from the president's repeatedly expressed determination to, in the words of the president himself, 'screw Amazon'.

Image copyright Getty Images
Image caption Relations between the White House and Amazon boss Jeff Bezos (right) are bumpy

Speaking to the BBC at the annual AWS event in Las Vegas, Mr Jassy said the decision was dangerous, as Amazon had "the best possible technology infrastructure platform".

Mr Jassy also said it was a "very dangerous" precedent if government was not going to base decisions on "objective valuations".

When asked whether the Jedi debacle would change the way AWS would deal with the government in the future - Mr Jassy said it would not.

Will that relationship improve? It seems unlikely as President Trump has made his dislike of Amazon clear. In part that's because Amazon founder Jeff Bezos also controls the Washington Post newspaper, which the president considers hostile towards him.

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In fact Amazon could be facing further battles with government agencies.

It is also the subject of a number of investigations into whether it has been acting in an anti-competitive way.

In early December, a Bloomberg report suggested that the Federal Trade Commission (FTC) had broadened its scrutiny of Amazon beyond its e-commerce operations to include AWS.

The report suggested that the FTC was investigating whether AWS was discriminating against companies that also work with other cloud providers, and prioritising those that work with AWS exclusively.

Mr Jassy, however, would not be drawn on this.

Facial recognition

There has been much scrutiny over Amazon's sale of facial recognition technology, which it calls Rekognition.

Civil rights campaigners have suggested it was "perhaps the most dangerous surveillance technology ever developed".

Rival Google has limited its use of facial recognition to celebrity face matching, and the chief executive of its cloud business, Thomas Kurian, told the BBC that it had not offered more powerful services like Rekognition because in some countries it is not legally allowed.

Mr Jassy said that there is confusion because of the lack of regulation at a federal government level.

Image copyright Amazon
Image caption Amazon has promoted its tech as a tool to fight crime

"If you don't have a federal government actually regulating something that people are debating, then you end up with 50 different rules in 50 different states and even more potentially in municipalities," he said.

Mr Jassy suggested that facial recognition had been used for a lot of good.

"It has reunited missing kids with their parents, it's found human trafficking, it's improved security and identity, there are all kinds of ways that it is adding real value to society," Mr Jassy said.

The AWS chief executive also said that in the nearly three years it has had facial recognition technology, it has had zero reports of misuse by law enforcement agencies.

Mr Jassy said AWS has provided very firm guidance to law enforcement agencies that if they're going to use facial recognition, they should only use predictions that come back with a 99% confidence level or higher, and even then only as one piece of evidence in a human-driven investigation.

"We provide free training for law enforcement on how to use facial recognition technology, and if we find we have any kind of reported misuse, which we haven't had yet, we would suspend their ability not just to use the service but also the platform," said Mr Jassy.

"But I can understand why people may want stronger assurances that it can't happen. I think that government should regulate it and give more guidance."

Climate change - is cloud helping or hindering?

Cloud companies store data in their own data centres, and Amazon is no different; the issue is that these data centres are energy hungry, consuming about 2% of electricity worldwide, and contributing to 0.3% of global carbon emissions, according to Nature.

Amazon's climate pledge includes a promise that its entire business will run on 80% renewable energy by 2024, and 100% renewable energy by 2030, with it pledging to become net carbon neutral by 2040.

"The environment is an obviously critical issue for the future of our planet, and to make it inhabitable for our grandkids, and Amazon has made a very aggressive set of goals that I'm not sure you've seen others take," Mr Jassy claimed.

Last week, BP announced that it would supply renewable energy to AWS's European data centres that drive its cloud platform.

Image copyright AWS
Image caption Mr Jassy rejects claims that working with oil companies is wrong

But BP and Shell are customer of AWS, which has attracted criticism, even from some of Amazon's own employees.

In April thousands of Amazon employees signed a letter saying the company should not work with the oil industry.

But Mr Jassy argues that cloud computing is not an enabler of activities that contribute to global warming.

"If cloud providers don't serve the energy companies, it's not like they're suddenly going to stop doing infrastructure like they already do today".

Mr Jassy claimed that cloud computing is more energy efficient than the IT infrastructure energy companies would be using otherwise.

"We'd rather be part of solving the problem, and helping the energy companies themselves be more energy efficient, and environmentally friendly. And then also be able to invest very substantially in renewable energy and other inventions in those areas at a faster rate," Mr Jassy said.