India’s e-commerce market has been expanding rapidly over the past few years, with consumers turning more and more to the Internet to shop for their needs. Online retailing giant Amazon.com Inc. AMZN is well aware of this fact and therefore has been investing heavily in the market.
India, with a huge population of 1.2 billion, has encouraging demographics and the economy is also improving as a result of the investment friendly approach of the new government. Last year, Amazon announced its plans to invest $2 billion to expand its operations in India. Early this year, it decided to increase its headcount by more than twofold in the logistics and delivery space in India in a bid to provide shipping services to sellers who are registered on the e-commerce portal.
But Amazon will not be limiting its investment to e-commerce alone. In an era where Indian enterprises are shifting from traditional data infrastructure to cloud-based services, Amazon has announced its plans to develop an AWS infrastructure region in India in 2016.
AWS in India
This move comes after Amazon localized its cloud service in China last year. Amazon now wants to set up data centers in India to tap the increasing demand for cloud computing.
AWS is already available in India and it claims that tens of thousands of customers in India are already using it. The list of customers includes Tata Motors Limited, NDTV, Ferns N Petals, redBus, Druva, Vserv, Hungama, and Novi Digital spanning a large number of market segments from auto to ecommerce to media and entertainment. Using AWS enables these customers to save costs, push innovation, speed up time-to-market, and increase geographic reach in minutes.
As per research firm Gartner, the public cloud market in India is flourishing. Revenues from public cloud services in India will reach $838 million by the end of 2015, which marks an increase of almost 33% from 2014 levels. Also, the firm expects cloud services spending in India to reach $1.9 billion by 2018.
So setting up local data centers in the country will not only perk up the service for existing customers but also attract new businesses to the cloud. This has led Amazon to believe that India will be one of AWS's main regions over the long term.
Our Take
AWS is in the business of providing computing infrastructure like a utility so companies don’t need to maintain their own IT infrastructure. It facilitates the movement that we have come to know as cloud computing. AWS’ sales touched $1.6 billion in the first quarter of 2015, up 49% year over year.
AWS currently runs 11 infrastructure regions, including the four that it has opened in Asia since 2010, in Singapore, Tokyo, Sydney and Beijing.
AWS is also the biggest public cloud infrastructure provider in the market, ahead of Google GOOGL, Microsoft MSFT, IBM Corp. IBM, VMware and many others. According to Gartner’s 2014 report, AWS has five times more computing capacity than its competitors.
However, the speed at which businesses are moving to the cloud and increasing innovation in the space has intensified competition. This also puts pressure on Amazon’s resources.
Despite the increasing competition, we remain positive about AWS' growth prospects. Amazon’s continuous efforts to launch new features, open more data centers globally and constantly lower prices will give it a competitive advantage.
Currently, Amazon carries a Zacks Rank #2 (Buy).
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