What Bezos Leaving as CEO Means for Amazon and AWS
As Jeff Bezos prepares to give up Amazon’s CEO seat to become the company’s executive chair in the third quarter of 2021, the big question now being asked is what will the market-dominating cloud and online retailer look like under incoming CEO, Andy Jassy?
Bezos, 57, announced his intentions Feb. 2 (Tuesday) as Amazon unveiled its fourth quarter financial results, leaving a sampling of IT analysts to express a wide range of reactions to the move when contacted by EnterpriseAI.
Since starting Amazon in 1994 from scratch as an online bookseller on the then-nascent internet, Bezos and his team have grown the company into the Godzilla of cloud and online retail, usually beating up competitors in its broad wake.
In handing over the reins of the entire company to Jassy, who joined Amazon in 1997, Bezos said in a letter to employees that he will be turning his attention full-time to new products and early initiatives within the company. In taking over the CEO seat at Amazon sometime in July, Jassy, 53, will leave his present post as CEO for Amazon Web Services (AWS), which he helped grow in leaps and bounds since its inception as the infrastructure that would internally drive and fuel what would become the retail giant.
Bezos called the company’s move to announce his successor “an optimal time for this transition.”
Analyst: “Legitimate Timing”
Judith Hurwitz, the president and CEO of Hurwitz & Associates, agrees. “I think it's legitimate timing” for Bezos’ move, she said. “If you look at the company's direction, it is clear that AWS is the future of the company. That's where a majority of the profit is coming from. And it's not like at this point in his career that he's hungry for more cash. My guess is that as somebody who is an aggressive builder, he probably feels like he's earned the right to say, ‘OK, what do I want to play with now? I think it makes sense.”
For Amazon as a whole, after having Bezos at the helm for all these years, it will be quite a change when the transition takes place, said Hurwitz.
“Amazon is at a crossroads,” she said. “How much are they going to be able to grow at the same pace? Clearly, with their web services, they were the key leader in that space, and now they're being chased, as happens with any key market leader. They're under a lot of pressure from differentiation and growth, with companies like Microsoft and Google nipping at their heels.”
At the same time, Jassy is interesting, opinionated, aggressive and a good match for the culture of Amazon, said Hurwitz, who has heard Jassy speak at a wide variety of Amazon technology events in the past. As he takes the CEO’s post, the company will now have to fill Jassy’s shoes at AWS with the right person and will also likely find people to help Jassy with the company’s retail arm, where he has less experience.
“I think that what Jassy will do is he will bring in a retail supply chain leader with very deep expertise and he will probably take a key lieutenant and put that person in charge of AWS,” said Hurwitz. “Some of it is sort of the evolution of a company. They are no longer a cool startup or a cool emerging company, but are now a big business. You could actually see their supply chain as sort of their core differentiation.”
Not A Surprise Move
Another analyst, Rob Enderle, principal of Enderle Group, told EnterpriseAI that the Bezos announcement doesn’t surprise him because many startup executives love the exciting early stages of their companies and then get bogged down in the boring details and bureaucracy, regulation and potential unionization that come later.
“Folks that love that early phase tend to hate the sustaining phase that Amazon is now in,” said Enderle. “I think Bezos found that his days were filled with things that he found annoying and discovered he didn’t like his job anymore as a result. It’s not uncommon.”
Bezos may also be peeved that Elon Musk’s SpaceX project seems to be doing so much better than Bezos’ Blue Origin space project, so he may have decided to focus more on that effort, added Enderle.
“Also, Microsoft has been on a run with Azure, and he may feel that to better drive AWS, he needs to do what [Microsoft’s Bill] Gates did and put his cloud guy in to run his company,” said Enderle. “I think that is a mistake, though, as Amazon is mostly a retailer, not a solution provider like Microsoft. That move made sense for Microsoft, but Amazon is a massively different company, so I don’t expect this to end well for Amazon, but it could help AWS a lot.”
Enderle said he has expected to see Bezos leave the CEO’s seat since Amazon was flagged for antitrust in Europe in November 2020. “You may recall it was the anti-trust action against Microsoft that drove Gates to step down,” he said. “Being called into Senate hearings and depositions gets old pretty quickly and can cause CEOs to rethink their job responsibilities.”
Ultimately, Enderle said he’s not sure that this is the right strategy for Bezos and his company right now. “I think this will end badly as there is no evidence of succession training, and the move mirrors Microsoft’s successful move. Still, Amazon isn’t Microsoft. To run Amazon, you need to be an online retail expert, which has to do with marketing, liability, end-user product development, and buyer engagement. These are things that should be very foreign to a cloud expert [like Jassy].”
Possibly Fueled by Potential Government Attention to Big Tech?
Several other analysts said they believe that potential broader actions by governments in response to worries about the power of large tech companies could be helping to fuel Bezos’ desire to leave the CEO’s post.
“This is a bit of a curious time for Bezos to be leaving, given that public and regulatory indignation about the power of big tech is really starting to gain ground,” said Dan Olds, principal analyst of Gabriel Consulting Group. “It could very well be that Bezos, as the second richest person in the world, thinks that removing himself as the head of Amazon might make them less of a target” if U.S. or other government regulators decide to move toward examining the company and its marketplace actions more closely.
“I think that the demonizing will continue, but it’s going to be more like professional wrestling than a real fight,” said Olds. “The new [Biden] administration will yell a lot, but I don’t think they have the desire to take on the big tech companies for a couple of reasons. First, many of the staffers in the new Biden administration are from tech companies, including Facebook and Google. Second, tech is one of the biggest contributors to the Biden campaign specifically and to Democratic candidates in general.”
Olds said he sees it as unlikely that the new administration will move anytime soon to turn on the tech industry, which was one if its biggest supporters. “I think there will be a lot of talk about breaking up the tech companies under the Biden administration, but not much action,” he said.
Maribel Lopez, principal analyst for Lopez Research, also thinks it is an interesting timing for a CEO transition.
“With a different CEO at the helm, it's easier to claim that change is on the horizon and government intervention isn't necessary at this time,” she said.
Patrick Moorhead, principal analyst with Moor Insights & Strategy, said that’s a plausible scenario, but that it wouldn’t entirely remove Bezos from any future government actions even if he no longer was leading the company. “As Bezos was CEO during the times regulators [might] want to know about it, none of these changes will keep him from being interviewed or involved,” said Moorhead. “I do think this move paints a smaller target on Amazon in the future for almost everything as Bezos, one of the richest men on the planet, will fade more into the background.”
On the other hand, Bezos could be making the job change just as a natural progression of his growing task list, way outside of any concerns about any government actions, he added.
“Bezos's span of control had increased over the years, adding space, media, and even environmental programs under his eye,” said Moorhead. “I think Amazon needed more time from a CEO than Bezos could provide, and I believe Bezos wanted to expand his horizons, too.”
Leaving On Top
“From a practical standpoint, Bezos is leaving Amazon on a high note, with record revenues, earnings, etc.,” said Charles King, principal analyst for Pund-IT. “Plus, the company is well-positioned to remain a driving force. Andrew Jassy is a wildly successful and deeply knowledgeable leader in his own right.”
All of those factors make it a good time for Bezos to shift gears, said King. “Plus, as executive chair, he will clearly be in a position to keep an eye on things.”
King does believe that Bezos might prefer to head out before more governmental antitrust scrutiny is aimed at Amazon, he said. “I expect Bezos would prefer not to be the public face of Amazon during what could become contentious public hearings. Anyone who saw Bill Gates subjected to that public humiliation chalked it up as something to avoid. That doesn't mean that Bezos will be immune to subpoena but the longer he's away from daily managerial duties, the smaller the target on his back becomes.”
In the end, though, Amazon could ultimately be spared from any such attention in the near future, King continued. “What many forget about Microsoft's antitrust woes was the degree to which the company was generally disliked and feared by businesses and consumers,” he said. “If there is an antitrust action, I expect it'll be limited to one or two companies. Of the current crop of FAANGs, Facebook and, perhaps, Google seem to be the closest analogs to Microsoft in the 1990s.”
Bezos’ Departure a Surprise for Forrester Analyst
Sucharita Kodali, a principal analyst for e-business and channel strategy at Forrester Research, said she sees Bezos’ pending departure as CEO as a surprise.
“I don’t think many in retail expected this to happen this quickly,” she said. “Bezos is still relatively young for a CEO and I do wonder if the pressure of the government investigations, which a PR team cannot change, played a role in this decision at this time. His letter seemed to say that he does want to focus on innovation, which seems to be his passion.”
Kodali said that it will be interesting to see what Jassy’s appointment as CEO of Amazon will mean for the company’s retail business. “The new CEO is someone who is responsible for and is the father of the AWS business, for all intents and purposes,” she said. “Does this mean that it's full-steam ahead for cloud and advertising, while retail is more of a ‘maintenance,’ not growth business? It could actually be really good news for retail, but we won’t know the answer to that for months, if not years.”
Amazon as a Technology Company
With the departure of Bezos later this year as the company’s CEO, it will highlight Amazon’s shift from being a retailer to being seen as a tech company as Jassy brings his AWS leadership experience to the fore, according to David Bicknell, principal analyst with the thematic team at GlobalData.
“AWS is pivotal to Amazon’s business,” said Bicknell. “It accounts for a massive 52% of Amazon’s quarterly operating profit, but only 12% of total sales. It will continue to be the engine of Amazon’s growth and its most important unit for years to come. Technology is at the heart of Amazon’s operations, and its success is driven by its strength in the key themes disrupting the tech, media, and telecoms sectors, including cloud, artificial intelligence and the future of work.”