Amazon: Moving Up The Value Chain

| About:, Inc. (AMZN)

On Nov. 13, 2013, Amazon (NASDAQ:AMZN) announced that Amazon Web Services, Inc. (AWS) has introduced a new service called Amazon WorkSpaces.


WorkSpaces is a new fully managed cloud based desktop computing service, normally called as a 3rd-party virtual desktop infrastructure service or DaaS (desktop-as-a-service). As per the company it launched the new service in response to the repeated customer demand.

"Over the past couple years, the new service customers have requested most frequently is a virtual cloud desktop service," said Gene Farrell, General Manager of Amazon WorkSpaces. "They've been frustrated by the available options - traditional desktops that are hard to manage and keep secure, or virtual desktops that are expensive and deliver inconsistent performance. Amazon WorkSpaces aims to address these issues by offering secure, easy-to-manage, high-performance desktops in the cloud at a fraction of the price of traditional VDI."

Amazon's WorkSpaces allows its customers to offer a fully managed, cloud-based desktop experience to their end-users. The service allows the end-users to access the data, resources and applications they need with the device of their choice, including laptops, tablets, etc.

It's an anywhere, anytime, on-demand service with no up-front commitment, and customer can opt out of the service at any time. WorkSpaces are billed on a monthly basis. The monthly fee for Workspaces includes both the infrastructure (compute, storage, bandwidth for streaming) and the software applications. The fee ranges from $35 to $75 per Workspace per month. The service is offered with the pre-installed software(s) (e.g., Microsoft Office, Trend Micro Anti-Virus, etc.). However, a user can also add their own software.


Desktop management is the fundamental requirement for almost all the enterprises. Desktop management consumes lot of resources as it needs the constant upgradation of the infrastructure to meet the requirements of new technologies. Traditionally, a desktop is a computer (normally a desktop or laptop), which stores all documents, applications, or any other information for an individual or enterprise in a secure and personalized environment.

DaaS provides a fully functional virtual desktop, which works like a traditional desktop, but the vertical desktop typically resides on a 3rd-party server in a data-center. Virtual desktop can be accessed through the Internet from any location by the user who has the right to access the desktop. In simple words DaaS is the outsourcing of the virtual desktop infrastructure (VDI) to a 3rd-party service provider. The service provider manages the responsibilities of data backup, security, storage, and upgrades. BYOD initiatives, increase in mobile workers, better connectivity, high data transfer speed, security/IP concerns, as well as the cost-effectiveness are the key reasons behind the rising popularity of the DaaS.

Size and Key players:

According to The 451 Group, DaaS is set to become a $2.9 billion market by 2014 (see the chart below). The prominent players in the industry are Citrix (NASDAQ:CTXS) and VMware (NYSE:VMW).


Amazon is a leader in IaaS (infrastructure as a service) /PaaS (platform as a service) market where it competes with players like IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), etc. The company is way ahead of its competitors in the IaaS/PaaS market (see the table below).

The company's entry in the DaaS market is a welcome step, as it's an extension of its IaaS/PaaS service and will move up the value chain. The company is likely to meet quick success in the market due to its leading position in IaaS/PaaS market and ready availability of potential customers. This service will not only generate the revenues for the company but will also help in client retention. The company's aggressive pricing and brand recognition makes its competitors worried in all the industries in which the company operates. Now it's the turn of the players in the DaaS industry to feel the heat.

For investors it's good news as the company is not only entering another multibillion dollar market but also is moving up the value chain of its existing service, which hopefully will drive the margins higher. For a company like Amazon, which always follows the revenues any move that can enhance its margins should be applauded by the investors.

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