Europe’s Mini-AWS Shows How Profitable Providing a Cloud Can Be

Amazon Web Services is the 800-pound gorilla of public cloud. It developed when Amazon’s retail technology team had excess data center capacity and started leasing server time for web development. The timing was perfect, and as a low-margin retailer, Amazon went ga-ga over the profits (massive 38% operating margins) inherent in the tough-to-budget-for-cloud business. Their success is legendary, as are the cost overruns for some of their users.

Hefty AWS profit margins have attracted new competitors to the public crowd arena. A European discount grocery store chain, LIDL, is among the more interesting new challengers. Like AWS, LIDL has lots of servers and a network of interconnected stores, offices, and distribution centers. LIDL has some advantages over AWS with its European Sovereign Cloud product, which provides a level of compliance that is demanded in highly regulated Europe. Certainly, coming from the notoriously low-margin grocery industry, LIDL executives must be excited about the margins public cloud offerings provide.

Is the lesson here that you’ll soon be leasing server capacity from Wegman’s? Nope. Low-margin retailers have expanded into public cloud services due to a level of profitability that is difficult to match elsewhere.   

If you’re utilizing the public cloud, keep those expenses under control while not unnecessarily cloudifying apps that work well and are typically much more cost-effective in a traditional data center setting. A hybrid blend of colocation with direct connectivity to public clouds, which we offer at Direct LTx, maybe your best solution.

More information on what is required to control runaway cloud costs can be found in the Direct LTx executive briefing Cloud Challenges, which you can read by clicking here.