How Amazon Keeps Cutting AWS Prices: Cheapskate Culture 146
An anonymous reader writes "Amazon Web Services has cut its prices on 40-plus consecutive occasions, at times leading the charge, at other times countering similar moves by Microsoft and Google. This article at CRN includes some interesting behind-the-scenes trivia about how Amazon keeps costs down, including some interesting speculation — for example, that perhaps the reason Amazon's Glacier storage is so cheap is that maybe it might be based at least partly on tape, not disk (Amazon would not comment). The article also explains that the company will only pay for its employees to fly Economy, and that includes its senior executives. If they feel the need to upgrade to Business or First Class, they must do so from their own pocket. And instead of buying hardware from an OEM vendor, AWS sources its own components – everything from processors to disk drives to memory and network cards — and uses contract manufacturing to put together its machines."
Business class is a misnomer (Score:5, Informative)
Unless you work in finance, oil/gas or certain luxury markets and have money to burn you're flying economy no matter what industry you're in. It's not being cheap, it's being smart. You're stil going to get to the same place at the same time as the other passengers.
Re:Business class is a misnomer (Score:4, Informative)
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That is the airlines problem.
The more workarounds a person finds for not travelling (calls, emails, etc.) the less the cost to the ticket buying company; assuming they manage to keep productivity the same.
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Some people don't enjoy work and paying them more might get them to work on time or to work the whole day. Or you could just fire them and hire someone who has an understanding that they have agreed to do a job for a rate of pay.
Oh really? Alright I can play your game: those people have agreed to do a job that involved standard office hours. Travel means being asked to sit in a cramped aeroplane for many hours and give up their evenings and potentially weekends to do their job. By your own measure, work travel spreads outside normal work hours, so making it comfortable is hardly an unreasonable request. Just because an employee asks for something doesn't mean they should be fired over it.
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Some people don't enjoy work and paying them more might get them to work on time or to work the whole day. Or you could just fire them and hire someone who has an understanding that they have agreed to do a job for a rate of pay.
Oh really? Alright I can play your game: those people have agreed to do a job that involved standard office hours. Travel means being asked to sit in a cramped aeroplane for many hours and give up their evenings and potentially weekends to do their job. By your own measure, work travel spreads outside normal work hours, so making it comfortable is hardly an unreasonable request. Just because an employee asks for something doesn't mean they should be fired over it.
Precisely. Will I be paid for the weekends and evening I don't have with my family, friends or activites and will they. What about when they fly employees over weekends and expect them to be fresh and shiney Monday morning after being stuck in aircraft and airports over the weekend.
It's a fucking tax deduction anyway, fly me business class and I may have a hope of being productive on Monday and the rest of the week. It's false economy to spend the money to send someone around the world just to have them to
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Re:Business class is a misnomer (Score:5, Insightful)
You're stil going to get to the same place at the same time as the other passengers.
Not in the same shape though.
It might not impact you much if you are going to one conference, but if you fly to multiple destinations within a week, it will build up. Your back/joint pain, stress level, lack of sleep will show. It might mean that you will save 5k on the boarding passes of your exec but then pay millions for the bad decision she makes.
Re:Business class is a misnomer (Score:4, Insightful)
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It doesn't have to be multiple flights. Just one is enough - let's say you
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Yeah, good luck with that. They give more upgrades to monkeys that use their credit cards than they do people who travel often. As somebody who used to travel > 100k a year of domestic travel (plus international), those would barely qualify for an upgrade to super coach every so often given today's rates.
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I work in the oil/gas industry, and the rule is you are flying economy unless the flight is over 8 hours. We have to negotiate with supervisors to spend extra money to take a direct flight instead of wasting hours on connections and layovers...
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If you travel a lot for business there's a chance you have to fly for half a day or even more hours, sign a contract, shake hands and return home the same or next day. Using business class is the best way to arrive fresher for you meeting and make good decisions. For me doesn't make much sense to pay business for a less than 4-5 hours flight, but that's just me.
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Unless flying regularly is clearly stated in your contract (and I mean regularly, not 'you may be asked to travel from time to time'), the company is inconveniencing you over and above your normal duties, and causing actual discomfort in the case of many economy flights. You ask for decent standards or refuse.
I'm astonished to see so many people defend this. For flights of two or three hours, fine. For anything longer - absolutely not.
Cheers,
Ian
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Thing is...if you fly often for work, you will reach status within a year and be getting upgraded on every flight. The monday-thursday consultants and other heavy business travelers are getting their upgrades for free...the fees are usually being billed to the client, and clients don't like to pay for first-class.
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Try flying economy from the USA to china. If you expect your employee to be functional the moment they leave the airport on the other side, you'll fly them business at least.
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It's not being cheap, it's being smart.
I used to fly a lot when I worked for Boeing (commercial, not gov't contract). We had an entire travel department that arranged trips and accomodtions. And they prided themselves on finding the cheapest (crappiest, that is) deals that they could. One time, when I had to fly from Seatle to New York, I just called travel and said, "You find me the flight that meets your cost requirements. I'll upgrade to first class out of my own pocket." They practicaly shit themselves. It wasn't about the cost, it was about
Re:Business class is a misnomer (Score:4, Insightful)
True, but you have a nicer seat with more room, and everything before and after the flight runs faster and smoother. You have your own check-in desk and security line, so you can arrive at the airport an hour later than the economy-class passengers. You have a bigger baggage allowance, so you might not have to put anything in the hold - and if you do, it'll probably come off the plane first. All that can make the difference between a day trip and an overnight stay, or turn a trip of n days into n-1 days.
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I was once upgraded to "business class" on a flight from Madrid to Malaga Spain. As far as I could tell, the luxury afforded to the business traveler was being served my water in a glass rather than the paper cups given to the row behind me.
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Or, well, you get to silver, gold, platinum, or diamond and then get promoted to business class 90% of the time for the price of a coach ticket.
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When I was in the consulting world I often had to fly at the last moment so paid full fare economy, so by being polite while checking in I often was bumped to fir
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Conversely, US Government travel is always economy, and government contract fare seats are often the least desirable seats available (rear-rows, bulkheads, and middle). Although, rental cars are usually intermediate, not economy, and hotel per diem usually lets you stay somewhere pretty decent, though never luxurious. Altogether it's actually pretty reasonable for the tax payer and the traveler--however, the paperwork is still a nightmare!
Economy Class Only (Score:5, Informative)
Thankfully, the company I work for now doesn't require red-eye flights. So I can arrive at a destination, sleep overnight in a hotel bed, then wake up the next morning and start working.
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When I interviewed with Intel, I was told that they own (or maybe charter, I can't remember) their own planes to send people around. I thought it was cool, but they said they were often referred to as sardine cans. Tightly packed, very little space.
Re:Economy Class Only (Score:4, Informative)
Little planes can also be scary as fuck.
Re:Economy Class Only (Score:5, Informative)
They have (had?) regular flights between their west coast locations, you just show up and take a seat. I don't know that they fly charter flights anywhere else on a regular basis. It also wasn't unique to Intel, HP used to do something very similar.
Re:Economy Class Only (Score:5, Interesting)
I fly those planes regularly to get between Intel sites. The experience is infinitely better than commercial flights.
1) You go via smaller airports, or a separate terminal. No bilking for parking, stupid busses etc.
2) Walk in, wave your badge, get on plane. 5 minutes.
3) It's economy sizes seats, but they have a power socket.
4) Yes you do sit next to the execs.
5) You drop your bag on the trolley going out. It's on a trolly on the tarmac when you get out the other end
6) No one is going to steal expensive things from your bags.
7) No assigned seating. Get on, find a seat, sit down.
8) It costs Intel a lot less to fill its own plane than to pay commercial rates.
The downside is they are popular and so it's hard to get seats at short notice.
Re:Economy Class Only (Score:5, Insightful)
And I'm sure if you ever actually flew with one our your senior execs, you'd be mystified why you can't find them in the coach section...
Re:Economy Class Only (Score:5, Informative)
And I'm sure if you ever actually flew with one our your senior execs, you'd be mystified why you can't find them in the coach section...
A couple of years ago I flew back from Mobile World Congress (Barcelona) in economy class. An Intel exec was seated next to me and an IBM exec was across the aisle.
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Right, because they fly enough that they can get free uprades on almost every flight, or worst case they can afford to pay for the upgrade out of pocket.
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I can see this for domestic flights, but I'd be pretty annoyed if it were true for international flights.
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In large companies this may be really "no purchased business class seats", except that the company will buy for senior execs the most expensive economy seats and then get free upgrades for them because of the volume of travel bought by the company.
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Senior execs being required to use Airbnb if there is a couch to sleep on thats cheaper than a hotel room..
Ridiculous things your company has done to reduce travel expenses:
http://www.flyertalk.com/forum... [flyertalk.com]
I have a different theory (Score:3)
Fly Economy - tragic! (Score:5, Insightful)
We're supposed to be surprised that everyone is supposed to fly coach?
And, if you're custom rolling your backend at the scale of AWS, I wouldn't expect anything *but* sourcing yourself. Outsourcing is for organizations that don't have the expertise in house and want a finger to point if things go wrong. Vertical integration is more cost efficient if you have the scale to make it work.
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Flying from LA to Chicago or Seattle to Phoenix? Sure. Economy's just fine.
From NYC to Shanghai? Dallas to Rio? Anywhere to Honolulu or Juno?
More than 4 hours on a flight and pay the outrageous fees. your sanity will thank you for it.
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For certain services, commoditization makes it very unlikely that your internal organization will be able to compete in cost/quality ratios with specialized service providers. Example: Banks used to manage all aspects of their networking due to downtime impact, nowadays redundant providers can deliver networking with adequate SLAs (contractual, penalised) at lower cost than their internal staff, are there any banks that still lay their own fiber?
Cheapskate? (Score:5, Interesting)
From what the article decribes, Amazon isn't so much 'cheapskate' as operating perfectly sensibly given their scale, cutting unnecessary (but usually bundled) components, and not giving in to poorly justified; but commonly assumed, habits like sending Important Employees to fly business class.
I can understand why they would be scaring their competitors pretty seriously; but I'm not sure that I see the 'cheapskate' bit.
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I have seen many comments like this, but I think there are a lot of what-if scenarios to consider. Is it necessary for that person to work straight from the flight? It could be cheaper to fly them in the night before, and pay for an extra night in the hotel. Is this person expected to work while on the plane? If not, all that extra space mat not be necessary. How often is the person expected to travel? If this employee is hopping around the country, especially for a multi-city trip, perhaps the upgrad
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I've noticed that one thing that they are NOT skimping on is security, either physical or network. No one gets anywhere in any facility worldwide without controls, even Chinese and US government officials. I'm actually quite impressed with their degree of organization and adherence to (generally well thought-out) policies.
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I've heard this somewhere before... (Score:1)
Amazon, in its majestic equality, requires both code monkeys and senior executives to pay for their own upgrades.
Re:I've heard this somewhere before... (Score:4, Insightful)
Amazon, in its majestic equality, requires both code monkeys and senior executives to pay for their own upgrades.
It beats the alternative of providing the upgrades for free to the people who can most easily afford them, in the service of maintaining a good, solid, hierarchy.
AWS is NOT cheap (Score:5, Informative)
AWS is expensive, I can provide the equivalent of an m3.large reserved instance to my users for 1/4th the cost over 3 years, if you ammatorize my infrastructure over 5 years (which is what we've actually been doing) then it's almost 1/7th as much. The only places where AWS makes sense is if you're a quickly growing startup, have a VERY bursty workload, or you're so small that you can't justify 3 hosts for a VMWare Essentials bundle.
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Agreed, AWS is defintely not cheap by cloud standards. I recently did some cloud price comparisons and Amazon had, by far, the most expensive offerings. In some cases, where relatively small workloads were involved, services like Azure were half the price of AWS.
Re:AWS is NOT cheap (Score:5, Funny)
I also provide hosting. Give me money instead.
Fixed that for you.
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LOL, only to internal customers =)
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I don't doubt that **YOU** can provide the equivalent of x, y and z, but very few SMBs have that talent available. Is it worthwhile for a (for example) physicians' clinic to pay AWS, or cough up the money for staff/contractors to manage their cloud infrastructure? Hard call, and how many doctors can adequately judge whether the people that they're paying are competent?
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AWS is expensive, I can provide the equivalent of an m3.large
Oh, excellent! I need to analyze 5PB of data in a 1000 node Hadoop cluster, which I'll need for about a week. I'll need to start the analysis in 3 days. It's a bit of a last-minute rush job. What would you charge me for that?
What? You can't provide that infrastructure at any time at any price? Oh, rats. I guess I'll just have to use AWS.
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the money is that enterprise level setup to do a "Cloud" with backups, redundancy, and all the licenses (or employees that can work at that level) is easily 7 digits... before you're even putting your BUSINESS on it. For a startup that's literally paying bills as they cash checks a few thousand up front for access to a multi-million dollar setup isn't that bad.
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Yes, I've heard of Xen, and I've even run it in production, both Xenserver and Oracle VM flavors, and both sucked horribly. Back when VMWare tried the v.Tax I contemplated switching to KVM using RHEV but Redhat took almost 30 days to even get me access to a RHEV download by which time VMWare had backed off on their pricing.
As to the crack about redundancy and scalability, I've got a better uptime metric than any cloud provider, zero unplanned downtime in the last 5 years (vmotion + svmotion makes replacing
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Yes, I've heard of Xen, and I've even run it in production, both Xenserver and Oracle VM flavors, and both sucked horribly. Back when VMWare tried the v.Tax I contemplated switching to KVM using RHEV but Redhat took almost 30 days to even get me access to a RHEV download by which time VMWare had backed off on their pricing.
As to the crack about redundancy and scalability, I've got a better uptime metric than any cloud provider, zero unplanned downtime in the last 5 years (vmotion + svmotion makes replacing both hosts and storage a breeze) thanks to redundant generators, UPS, chillers, and internet connections.
There was a time when I ran Xen because a paravirtual VM ran MUCH faster than an VMWARE guest OS. Not so true these days and on modern hardware, but back then, the difference was immense.
Xen has always been reliable for me. The main problem was what it did to networking. And it added injury to insult by zapping the MAC addresses on my NICs on a routine basis.
Supposedly Xen4 fixes that. They make YOU do all the network setup. Which ordinarily I'd resent, but at least when magic elves aren't meddling around i
No license for Hyper-V (Score:2)
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Walmart on the web (Score:2, Informative)
Amazon has always been about low costs. It's why I love them as a customer, but ran the other way after interviewing for a job there. Their offices (at least the ones I saw in a Seattle tower) were dirty and dingy. I'm kind of a neat freak, and don't like that kind of atmosphere at home, so I could not handle the idea of tolerating it every day at work.
Re:Walmart on the web (Score:4, Funny)
You do not want to know what I'm doing right now.
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Amazon is not doing anything new. Walmart has had this general philosophy for a long time. Good or bad, they have been squeezing every cent out of their supply chain, using the power of their distribution centers to keep their costs low. I recall reading somewhere that their CEO occupies the same modest office that Sam Walton used, and it does not get lavishly redecorated often (if ever). At least they are passing the savings on to the customer.
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Unlike Wally-world, Amazon is not fucking over its employees at every opportunity. Amazon employees make enough that they don't qualify for food stamps, much less need them to survive. Amazon employees have actual benefits. Amazon employees have actual insurance. Amazon doesn't take out 'dead peasant' life insurance policies on its employees either. Even the much-pitied fulfillment center temps are treated better than the best WalMart employee.
Of course it is tape (Score:5, Insightful)
perhaps the reason Amazon's Glacier storage is so cheap is that maybe it might be based at least partly on tape, not disk
That is one of the stupidest things I have ever read. Of course it is using tape, why else would it take up to 24 hours to get your data when you request it? Everyone knows that is the whole point of Glacier, and the reason they can offer it so cheap. Nobody wants to deal with the hassle of having their own offsite tape library, so Amazon will do it for you with a convenience user interface. That is literally exactly what all of AWS is based on, doing something cheaper for you because they have the expertise and the facilities at scale.
could be blueray (Score:4, Interesting)
It could also be blueray disk based. Not as likely as tape based, but could be cheaper/faster at scale.
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On the other hand, Amazon certainly has the resources to get whatever the hell it is the movie studios use to create the same Blu Ray disks you get when you buy Back to the Future on Blu Ray. I have yet to have a Blu Ray have a read error, and I've got a few dozen of them. So maybe Amazon uses that.
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Commercial optical disks from movie studios are stamped.. Stamping disks requires costly equipment and setup time and only makes sense when you are going to make many copies of the same disk.
Writable optical disks often use organic dye which breaks down over time, especially when exposed to bright light. This is often why their shelf life is very bad.
There is no way Amazon is using either technology for this.
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Yeah, my bad, this could never happen.
http://hardware-beta.slashdot.... [slashdot.org]
BTW, consumer grade writable optical disks have a life expectancy of 10 - 100yrs depending on materials used.
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Nor is it ever cheaper and it's rarely faster. A LTO 6 tape is 2.5 TB uncompressed at about 60 bucks A 50 pack of 25GB BD-R's is also about 60 bucks and writes at what 30MBs? You need 5 running in parallel to get nearly as fast as a single LTO drive. DB-R's are about the same price as a sata drive per GB your better off plugging them in as needed though neither is as reliable as tape in the long term.
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LTO DRIVES are super expensive... and the cards to connect them are super expensive. That's why more people don't use them on the lower end they're out of most "hobby" range and even mild professionals that don't have somebody else footing the bill.
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LTO6 drives at 2500 bucks the cards that connect them about 200. Break even is about 55 tapes worth aka 55 3tb drives worth or 110 50 packs of disks.
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Yeh, but duct tape?
This sounds like an ad.. (Score:3)
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Your maths is off. $60 a month is $0.16 / hour (* 12 / (365.25 * 24)).
Also you're using AWS wrong, if you're comparing a by the hour price, with a contract price elsewhere. If you take AWS 1yr contract pricing, then the m3.xlarge will set you back $127pcm or $81 if you commit to 3yrs.
Sure it's more expensive, but not the orders of magnitude more that you claim. AWS is probably not cost-effective for a single box, but that's not the real use-case for cloud computing. If your workload is burstable, then o
Only cheap for the big players (Score:1)
Ignoring costs for persistent storage and network traffic (which will not be negligible, by the way), an EC2 m3.2xlarge Heavy Utilization Reserved Instance in N. Virginia costs $2691 up-front (for a 3 year agreement; i.e., getting the best possible per-hour rate) plus $86.40 per month, assuming you want 24/7 uptime (which, if your web server isn't up 24/7, you are just losing business). This is for a minuscule 160 GB of SSD storage, 8 "virtual CPUs" (which works out to be slower than a non-virtualized dedic
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Even if you could smooth out the $2691 over 3 years, that's $86.40+$74.75 per month = $161.15 per month
If $161 per month is a serious cost for your business, then you aren't a real business.
That is chump change.
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Yes, and somewhere between one and a zillion, it makes sense to roll your own. I was responding to the one comment.
If you need one, or five... use Amazon...
If you need five hundred... now you have some math to do...
If you need five hundred thousand... probably do it yourself...
Focusing on the wrong hand (Score:3)
The article focused on how Amazon cuts hardware costs. The first step there is a big one - once you let go of buying name brand hardware, especially for storage, the price drop dramatically. So dramatically, in fact, that hosting (largely electricity, cooling and network connectivity) becomes the major cost in the equation. Amazon is pushing for extremely high density, however, that has a ripple effect throughout your whole datacenter design. If you're not in a high cost area, you might ask why focus on density because floor space is relatively cheap.
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Floor space is really cheap... until you run out. Once you run up against a hard limit like that, getting more can be very expensive in money and time.
I don't get it. (Score:1)
So the story is Amazon provides cheap services by cutting costs. Is this new or some kind of bad thing?
The way I see it the consumer benefits from cheaper service.
does amazon AWS pay well? (Score:2, Interesting)
I got a couple of recruiting calls from Amazon AWS in northern virginia last year. Wasn't really on the market and I don't believe I applied to them. They probably got my resume off a job site. I generally don't take interviews without talking money first (Im in the top of the market, so why waste my time if you can't pay?). Typically if they can't afford me, it ends there. They refused to talk numbers. I also got back a bizarre statement of 'there is more to working at amazon, then money'. This typically m
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'there is more to working at amazon, then money'.
A lot of companies say that. Doesn't necessarily mean that they underpay, they just don't want someone who will jump ship if some competitor offers them $5k more.
Amazon principles (Score:4, Informative)
The Amazon business is focused around it's core principles:
http://www.amazon.com/Values-C... [amazon.com]
Notice that "Frugality" is listed as one of them.
Don't just cut, but clarify (Score:2)
But I look at two scenarios with AWS, one is that I will screw something up and end up with a $2,000 bill. I will turn on some database crap that is insultingly expensive the way I am using it. My other fear is that I will get hit with an overnight DDOS that wipes out my budget for the month some time well before the month is over. Thus I would n
Shareholders profits? (Score:2)
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Replying to myself: I assumed they would cut expenses to feed the shareholders but I was wrong. TFA explains:
Amazon generated a whopping $74.45 billion in revenue for its financial year to 31 December 2013, but just $274 million in net income, a margin of roughly 0.3 percent. It sells Kindles at cost.
Compare this with Google, which saw net income of $12.9 billion on revenues of $59.8 billion for the year to 31 December 2013, a margin on 21.6 percent; or to Microsoft, which posted revenue of $77.9 billion for the year to 30 June, with a net income $21.9 billion, a margin of 28.1 percent
Question is: how do they manage to make shareholders accept that?
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Replying to myself: I assumed they would cut expenses to feed the shareholders but I was wrong. TFA explains:
Amazon generated a whopping $74.45 billion in revenue for its financial year to 31 December 2013, but just $274 million in net income, a margin of roughly 0.3 percent. It sells Kindles at cost.
Compare this with Google, which saw net income of $12.9 billion on revenues of $59.8 billion for the year to 31 December 2013, a margin on 21.6 percent; or to Microsoft, which posted revenue of $77.9 billion for the year to 30 June, with a net income $21.9 billion, a margin of 28.1 percent
Question is: how do they manage to make shareholders accept that?
I'm guessing the investors expect Amazon to become and stay the Walmart of the internet (or perhaps the Sears and Roebuck from catalog days) and be be able to either ramp up margins or pay them at that level for a LONG time.
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I am not used to shareholders able to foresee what can happen beyond 3 minutes.
FTFY.
And yeah, it's odd, but I can't think of any other explanation.
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It's the bigger seat and room you get in First/Business. Those make a difference if you have to fly long distances (7+ hours) week in and week out.
Try it sometime to see what I mean.
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Wider seats in first class. Sometimes business class is a rip-off (same seats, better snacks). But on long trips, first class seating is much more comfortable.
I could care less about leg room (I'm only 4' 18" tall). But I'm built like a tank and my arms hang into the aisle or across the shared armrest in economy class seating.
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This is exactly it. My brother who is 6' 10" and built like a tank always pays to upgrade when he has to fly a long distance like to Europe. I however don't care I'm 5' 11" and pretty normally wide. (It's funny being normal sized in a big family BTW. I grew up thinking I was short.) I can suffer through coach just fine thank you very much. Though I have been known to jump on getting an exit row if the occupant doesn't want to/can't open the door.
Not being huge has other advantages as well. For example I h
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I could care less about leg room (I'm only 4' 18" tall). But I'm built like a tank and my arms hang into the aisle or across the shared armrest in economy class seating.
4' 18"? That's almost 5' 6"!
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I see zero reason why any company would pay for business or first class. It's like paying ten times the what it would otherwise cost, for...what, the chance to have 3 nips of something on the way? Good for Amazon for not flushing its money down the drain.
I get the impression you have never traveled business class. On a trans-atlantic filght, it makes a world of difference. It is the difference between stepping off the plane feeling like you have been shipped in a crate and feeling like you just woke up from a nice nap. When I flew business class, I didn't want to get off the plane and when we arrived I was like, "Oh, were here already?"
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