- Adam Selipsky inherited a profitable, well-run business from new Amazon CEO Andy Jassy this week.
- Insiders and analysts say Amazon has just one ask of him: Don't screw it up.
- Selipsky is well-positioned to keep AWS doing what it does best: Moving fast and growing.
- See more stories on Insider's business page.
By all accounts, Adam Selipsky inherited a plum situation from his predecessor Andy Jassy as he officially took over as CEO of Amazon Web Services this week. Jassy replaced Jeff Bezos as CEO of Amazon on Monday.
With a $54 billion annual sales run rate, and the driver of most of Amazon's overall profits, AWS is the market-leading cloud and considered far ahead of rivals like Microsoft Azure and Google Cloud. AWS surpassed $45 billion in annual revenue last year, nearly quadrupling the $12.2 billion it generated in 2016.
Experts and analysts told Insider that Selipsky's hiring shows what Amazon wants from the new head of the cloud business, arguably the company's single most important unit: Just follow Jassy's lead and don't screw it up.
Selipsky served for 11 years as the de facto chief operating officer of AWS, helping Jassy build it from the ground up, before spending the last two years leading Tableau — now a Salesforce subsidiary — through a pivot to the cloud. That experience, and his close working relationship with Amazon CEO Jassy, means he knows exactly how and why AWS got where it is, and is well-positioned to keep the ship steady.
"If they had wanted something more transformative, they would have gone with somebody else," said Lydia Leong, a vice president and analyst at Gartner focused on cloud.
Selipsky is 'very much part of that culture' and just needs to 'stay the course'
Analysts said Selipsky was the natural choice for a "stay the course" strategy, given that AWS is doing enormously well — so there's no reason to change paths.
"Adam is certainly a very, very familiar face in AWS, even though he's been at Tableau for some number of years now," Leong told Insider. "He knows the culture. He's very much a part of that culture."
Indeed, Selipsky is a familiar face to many within the company, as company sources told Insider that Jassy picked a close ally to take over the cloud business, and the two were closely aligned during their mutual time at AWS. With Jassy now CEO of the entire Amazon empire, that dynamic could help keep the cloud business in lock-step with the larger organization.
In meetings, the two were "always on the same side," one source recently told Insider, and Selipsky was unlikely to push back against Jassy's ideas or offer a different take.
"He and Andy thought so much alike that they were always on the same page," the source said. "I never saw one disagreement," another insider said.
Selipsky's success in leading Tableau through its acquisition by Salesforce and beyond shows that he has the leadership experience to helm a large organization like AWS, said Dan Newman, an analyst and CEO of Futurum Research.
Newman also drew parallels with Intel's recent rehiring of CEO Pat Gelsinger, who had led VMware before returning to Intel — calling it an "outside, inside perspective."
"Bring someone who has a little bit of that DNA in their blood, that has that experience being part of a growth company, and then coming from the outside back in and putting that passion back to work, to drive the company to its next wave of growth," Newman told Insider.
How Selipsky can maintain AWS momentum
Part of AWS's success comes from the speed and frequency of its feature roll-outs, analysts said, and Selipsky would be wise to continue that strategy as it looks to future growth.
Leong said the cloud division's "raw feature velocity in their existing services" is and continues to be impressive. "Every re:Invent brings a new blizzard of announcements, and as well as things that are completely a surprise," she said, referencing the company's annual cloud conference.
Over the years, there have periodically been rumors and reports that AWS could expand into the Software as a Service, or SaaS market — including discussions of creating a software bundle with companies like Dropbox and as Insider reported.to challenge Microsoft's work software dominance,
But analysts note that Selipsky doesn't need to venture beyond its core cloud infrastructure business: Why build or buy a rival to apps or Slack, when both rely on AWS infrastructure to function? Salesforce, Selipsky's former employer and arguably the biggest "pure" SaaS company on the planet, is an AWS customer and partner, too.
"Right now they're a core building block in the SaaS ecosystem, and they make a lot of money by being the neutral infrastructure substrate that underlies much of the SaaS on the planet, including going forward, Salesforce," Leong said. "So do they need to begin competing in that space in a way that would probably further alienate partners?"
At the same time, Newman said AWS has also been aggressive about expanding beyond infrastructure to capture what is an over $3 trillion market for IT — that includes cloud platform offerings like compute, networking, on-premise, edge, artificial intelligence, security, and software applications. So sticking to smart investments in the future of cloud is another tack Selipsky could take, and Newman said AWS is already "setting the market" in doing so.
Plus, with a growing portfolio of vertical cloud solutions — selling directly to industries like manufacturing or retail — Leong said she expected to see continued growth in that area for AWS, especially in manufacturing. Dave McCann, vice president of AWS Migration, Marketplace & Control services, previously told Insider that the company is "thinking increasingly by vertical."
But AWS is not alone in this approach. Maribel Lopez, founder and principal analyst of Lopez Research, told Insider that 2021 is all about vertical cloud because the "base foundation" is already tapped out. "If you talk to anybody, they've all started to roll up some vertical cloud," she said.
Microsoft has done the same by launching various industry-specific clouds, including for finance, manufacturing, and nonprofits, and Google has also made headway in healthcare, media, and manufacturing verticals.
Selipsky has inherited a good situation, but there will still be challenges
By and large, Selipsky has inherited a wildly successful business — and it's not showing any real signs of weakening, Newman, of Futurum Research, said.
"They've also been an juggernaut in terms of competitiveness and profitability, as it pertains to enabling the bigger Amazon to invest in its initiatives, which are sometimes understated: Amazon moving to same day in one hour shipping, arguably those initiatives are able to be supported because of just how profitable AWS is to the overall company," he said.
At the same time, there will be challenges: While Amazon's cloud lead is considerable, Microsoft and Google both continue to invest heavily in their own cloud businesses, via acquisitions, big hires, and major product launches. Analysts also said that legacy IT giants like IBM and Oracle are making a comeback as technologies like hybrid cloud, which combine cloud platforms like AWS with traditional on-premise servers, gain in popularity.
AWS is also facing slower growth: Its revenue expanded 30% last year versus 55% in 2016, though Wall Street has largely chalked this up to the law of large numbers. Microsoft, too, has shown slowing cloud growth, as the sheer sizes of both their respective cloud revenue bases grow, it will be harder to show dramatic change from quarter to quarter.
Amazon at large is also contending with increased regulatory scrutiny in recent years, including antitrust investigations and concerns over its treatment of workers. A recent House antitrust investigation raised concerns over AWS and its relationship with startups, specifically.
But those within and outside of Amazon agree on one thing: Selipsky is the right exec for the job.
"As an AWS alumnus, Selipsky will be considered a safe pair of hands which will reassure customers and help maintain trust in the AWS brand," CCS Insight analyst Nick McQuire said.
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