“As Apple and Amazon compete for a greater share of consumer dollars and attention, they also have a particularly intimate business relationship: Apple is spending more than $30 million a month on Amazon’s cloud, according to people familiar with the arrangement,” Jordan Novet reports for CNBC.
“Apple’s cloud expenditure reflects the company’s determination to deliver online services like iCloud quickly and reliably, even if it must depend on a rival to do so,” Novet reports. “People use more than 1 billion Apple devices each month, and accordingly, Apple has considerable computing and storage requirements.”
“The company is investing heavily to build its own infrastructure: In January 2018, Apple announced plans to spend $10 billion on data centers in the U.S. within five years,” Novet reports. “In December, Apple said it would spend $4.5 billion of that amount through 2019. The company also depends on smaller third-party cloud providers. But it also relies on the big cloud providers, including Amazon Web Services and Alphabet subsidiary Google.”
Read more in the full article here.
MacDailyNews Take: Apple is a partner with Amazon in more things than they are a rival. See Apple’s store on Amazon.com here.
Stupid, you have the ability, in house OS, hardware, CPU, and engineering design and your paying a lower tech company Amazon for server time?
Apple is merely outsourcing its cloud needs to Amazon who is currently a “higher tech company” regarding cloud while it gets its own cloud services developed and field-tested.
I agree that Apple should be handling this in-house, but Amazon is nowhere near a ‘lower tech company’ when it comes to the cloud. They are the best in the business.
Apple USED to have server hardware and software. The XServe was absolutely brilliant, the XServe RAID was great for storage, Mac OS X Server was a good server OS.
Apple even could claim a supercomputer at number three on the world top 500 supercomputer list, System X at Virginia Tech.
That’s all gone now. Apple abandoned even the small business server market. The Server app is utterly useless now, the hardware has no lights-out management, no redundant power supplies, Apple is even removing support for booting from RAID.
They can’t even handle their own servers now. It’s pitiful.
Explains why Apple can’t build a faster Mac.
$30M represents about $0.03 per Apple user and a small fraction of a percent of Apple’s monthly services revenue.
Get a clue.
You don’t help companies that crap on you…when you don’t need to.
Apple Apologist Patrick:
It’s not about the money. It’s another example of Apple losing capability that it once had in house. The longer Apple allows its mental muscle to atrophy, the more quickly the decline occurs.
Software and hardware design competence steadily erodes to the point where they can’t build or design anything themselves, soon the high margin parts of the business have to be offloaded.
sell millions, because to many people this is “good enough”.
If it takes Apple over 6 years to redesign a Mac workstation, and Apple can’t design server systems, what does this tell us?
Apple can but they appear to not want to. I hope it is a pause before moving on from Intel.
Anti-Apple troll Mike:
Apple is perfectly capable of designing and selling a new Mac Pro or X Serve every year. They’ve simply decided that it is not worth their time to do so. Apple makes product decisions based upon the market not the whims of trolls, pseudo-journalists, and ‘Apple-is-doomed-without-Steve’ graybeards.
If you believe Apple is not technically capable of building any product it wants to, then Quartz articles are perfect for you.
Apple has NEVER had the capability in-house to provide what Amazon provides from a cloud services perspective… or have we all forgotten about Steve Jobs’ tragic MobileMe mistake?
You don’t know tech. Amazon is the global leader in cloud. Almost everything you do on line will at some point be touching the AWS network.
I’m amazed at how many commenters have absolutely no grasp of scale.
$30M dollars of AWS services per month represents a vanishingly small percentage of the compute power required to drive Apple’s data services.
Apple uses AWS and Azure as a supplement to its own infrastructure during times of peak demand, like on software release days.
Anyone who thinks Apple’s tiny AWS usage is a harbinger of Apple’s imminent downfall is a complete moron.
There are plenty of morons on Wall Street because Amazon’s AWS is being constantly praised, but there’s nothing that’s being praised when it comes to Apple. It’s usually being said that some business of Apple’s is failing with no recovery in sight. Apple’s growth prospects are usually said to be rather poor and Apple’s relatively weak P/E confirms that suspicion.
The earnings and PROFIT is nothing for AWS, but it is always being used as a example of hi-tech in the tech press. It isn’t. Going into the future there is a growing need for a Mac server to connect Mac devices using OS 10.
Apple earnings per share have grown at 22% per year every year for the last 10 years. This insane growth rate is would be insane for a successful startup. This performance is nearly incomprehensible given that Apple has been the most the most profitable company in the world for most of the last 10 years.
Apple’s historically low P/E ratio is only proof of how clueless Wall Street has been in predicting Apple’s ongoing success. If Apple’s history of insane earnings growth were properly valued by Wall Street, Apple’s market capitalization would be $3 Trillion dollars. Apple’s shares trade at a discount not because Apple is faltering, but because Apple’s performance is literally unbelievable to most investors.
Moreover, if this is pocket change to Apple, then why not maintain control of data with in-house servers to eliminate the reliability and security risks that come with outsourcing?
To reiterate the point Patrick made above, the AWS servers provide overflow capacity for things like software release days. They do not handle Apple’s base server load. The alternative to doing it this way would be for Apple to buy, install, and maintain equipment that would only be used a few days a year.
When you need to move something heavy occasionally, do you rent a truck or do you buy one that will sit idle almost all of the time? If you rent one, do you expect to be criticized for wasting $300 on rentals when you could buy a truck for only about $50,000?
You honestly believe Apple uses its direct competitors cloud services just for surge capacity? Think again. Now that Apple is run by bean counters, they are innovating less and outsourcing more on all fronts. It’s no wonder why the patchwork of different services Apple collectively calls iCloud has never and will never work seamlessly. There is no one at Apple making it so.
There are however teams of accountants trying to find ways to get fractions of a penny out of Apples products. Cook would give away all Apple IP to Amazon if Bezos would give him a screaming server deal.
Being late to streaming and without server capacity due to stupid mismanagement thereof, Cook has no way to push video without relying on other companies abilities. Apple had to buy Beats to figure out streaming audio. Apple isn’t a leader in streaming video yet, maybe never will be if he just slaps the Apple label on Amazon Video distribution networks.
Problem is long term. While no CEO sticks around long enough to see the fall, the outsourcing strategy stinks because no suppliers are going to let Apple perform better than their own services do. At some point all competent suppliers grow up to become top tier competitors. We already see how Apple is losing its edge. What will Apple have after a decade of relying on other companies hardware to run its own business? No unique advantages except a personal relationship with the new big brother and richest company, Amazon.
Of course Apple has an enormous cash cushion but I predict a couple bad seasons of Apple TV and subscrbers will dry up. The novelty of Watches will wear off. The inability to manage ones own files on an iPad will prompt people to look at personal computers, maybe from other companies. All the clunky iCloud services can one by one be replaced with 3rd party stuff like Dropbox for less money than greedy Apple charges.
Other than macOS, which itself is now a bloated mess, Apple has nothing left that is unique and irreplaceable. Even IOS is easily copyable, after all Google did it. Thin client interfaces are a dime a dozen. If that’s the Apple plan, yikes.
Integrated personal computers and servers should be hard and Apple should own the lions share. It doesn’t because Cook has mismanaged it badly. As Apple loses the plot on personal computers, a leaner more hungry company can and should rip Apple’s weak hardware offerings to shreds matched with cheaper vertically integrated services that just work.
Apple puts no effort into the Mac and servers however because as a duopoly market, bean counters have decided that Mac users are loyal enough to stick around forever. They will be proven wrong. Apple has become fat slow and greedy.
You honestly believe that Apple can run the full server load for the Apple Store, iTunes, Apple Music, the two App stores, Apple Mail, News+, Apple TV, and iCloud for $30 million/month? Think again.
I believe they handle the majority of the items you list themselves and outsource primarily iCloud (most likely over 85% of the storage requirements for the services you listed) to AWS and Azure. It is also possible that they pay a bit extra on the ‘surge’ months.
Stop wasting money on share buybacks yes they can.
$39M per month is $360M per year. At that rate, it would take 27.8 years to reach $10B. That is admittedly an overly simplistic cost analysis – there are a number of considerations that might drive Apple to want full control of data and security using its own data centers. But the cost story appears to favor renting, not buying. And that is not even considering the fact that Apple-owned data centers will involve considerable operating costs. Apple won’t suddenly recover $30M per month by investing in its own data centers.
Typo…$30M per month
Apple has enough money to practically do whatever it wants but chooses not to. It’s funny, though. I thought Apple had huge data centers in the U.S., although not as many as Amazon, Google or Microsoft. Still, not being able to handle its own iCloud seems rather odd to me. Not that I’m an expert on what it takes to support iCloud with millions of users. I guess all that praise AWS gets is deserved. I still think Apple missed out on a huge chance of growth by not creating a cloud business as all the other major tech companies chose to do.
It is short sighted thinking on Apple’s part like sidelining Mac’s, Routers, and in house Monitors, there is a greater-growing need for connecting devices in the future. I want Apple solutions and not Windows/Android piecemeal solutions.
“not as many as Amazon, Google or Microsoft”
With cloud services, “not as many” also means not as reliable, not as fault tolerant, and not as scalable. So, if dumping a few billion dollars will end up with something not as good as the competition… then why? Just to have a very expensive thing to point to to call your own?
And, if you DO make something that’s even remotely adequate, due to the amount of money you had to spend on it, you’d have to sell the service to recoup the costs. For a consumer focused company like Apple, that’s just a distraction.
There is no GOOD reason for Apple to own their own services. There are plenty of BAD reasons, though. I’d imagine that most people on this board haven’t looked at Amazon or Azure as those are for “the kids”.
Distraction and lack of focus for tech company like Apple is wasting money on low margin no profit content. That’s distraction.