The advantage of being the Indian arm of a cash-spewing technology giant such as Amazon is its innate ability to sacrifice profit at the altar of growth. Even as parent, Amazon is estimated to have sunk over $6 billion in its loss-making ecommerce operations in India, it has invested $3.7 billion in its cloud business and will be investing another $12.7 billion by 2030.

AWS in India, for the first time, surged past the billion-dollar revenue mark (₹8,956 crore) in FY22, more than doubling its FY20 top line of ₹4,162 crore. The boom in digital demand since the pandemic has lifted the tide of not just IT services players but also fuelled demand for dedicated cloud players such as AWS. For instance, the Co-Win app for Covid-19 was built on AWS’ platform. But despite the billion-dollar sales, AWS India, with a capital of over ₹1,200 crore, has a somewhat chequered history of profitability (See: Cloud with a silver lining). Talking of scalability in business, while AWS India crossed ₹1,000 crore sales in FY18, it hit a billion in just four years. But, over the same period, profits shrank from ₹176 crore in FY17 to a marginal loss of ₹2.30 crore in FY22. The beauty of cloud is that, just as SaaS, it is a high gross margin machine with the cost incurred on evangelising the service being the biggest variable at play.

Taking a long-term approach with a bleeding bottom line is the game that only a few can play. In the context of global revenue, India is just a speck. AWS’ global revenue increased 29% year-over-year to $80.1 billion, albeit lower than the 37% growth seen in CY21, with an operating income of $22.8 billion. The cloud division churned out $5.2 billion in operating income in Q4, almost double the profit of Amazon as a whole! With that kind of profits, Puneet Chandok, formerly with McKinsey, does have a long rope to play with. The India cloud market is dominated by Amazon, Microsoft, Google, and IBM and is expected to touch $7.4 billion by 2024 growing at a CAGR of 22.2% for 2020-24, as per the International Data Corporation.

“It's the investments we're making in the country. It's not just infrastructure and regions, we are building local zones. We've got two local zones, and two more will come up by year-end. We are building India's best, most diverse, most inclusive tech team. Investing in resources, building capabilities to serve the world as a lot of our global support organisations are being built out of India,” says Chandok.

While employee benefit expenses cost AWS India ₹1,244 crore last fiscal, the launch of its second AWS infrastructure region in Hyderabad will further increase costs as the new centre is expected to create 48,000 full-time jobs. “We can serve some of the largest businesses globally out of India. We take a long-term view and not a quarter by quarter, year by year view. So, we'll continue to invest for the next few decades, both for our India-to-India business and our global business,” adds Chandok.

Though there is an increasing buzz on falling IT spend, not just by big companies but even by startups, Chandok does not foresee a doomsday. “It's a natural rhythm of business where you have cycles of aggressive growth followed by periods of stabilisation. Both are healthy trends. I don't think we are in wait and watch mode.”

Incentivising the ecosystem is one way to keep growing. For instance, AWS offers $100,000 in credits to a startup who cannot afford higher costs at the beginning. The bet here is that when the entity scales up, it will eventually turn into a paying profitable customer. Citing an instance, Chandok says, “Look at Dream 11. Four years ago, when I joined AWS, they were just a couple of million subscribers and today they are 180 million subscribers. The kind of growth is unbelievable. It's an incredible momentum, and we want to be part of that journey.” It’s not just game tech that AWS is bullish about. “Look at foodtech, Swiggy and Zomato are running on AWS and serving millions of customers in India. Paytm is running 300-plus applications when we last spoke to them. Quite honestly, virtually every sector, every industry is being invented and reinvented by the cloud in India. Banks are catching up as well,” says Chandok.

According to IDC, by 2023, 40% of the world’s 2,000 largest public companies will reset cloud selection processes to focus on business outcomes rather than IT needs. Greater emphasis is expected on technologies such as data lakes combined with artificial intelligence (AI) and machine learning (ML) to help companies deliver value to their customers, resulting in increased revenue, states the study. Chandok concurs. “The mental model is simple -- build scale, build capability, drive efficiency and productivity and bring it back to the customers. That's how the flywheel runs. Customers need technology and cloud both in times of growth and even more in tough times. That's the reason we focused on cost optimisation, high RoI projects, and a lot of the stuff that we are doing in generative AI.”

On the growing buzz around generative AI and the fact that Microsoft’s Azure would have an edge in the cloud thanks to OpenAI, Chandok plays down the threat. “The intent for us is to cut down the noise out there and really democratise generative data. Make it easy, simple, purposeful, and secure. We launched Amazon bedrock, which is a first-of-its-kind managed service. We are bringing multiple foundational models and we believe it's not a winner takes it all model. Customers will need best-of-the-breed purposeful models. So that's the reason we are building a managed service on top of it [generative AI],” says Chandok.

While pricing in the tech industry is typically affected by downturns, the likelihood of a race to the bottom seems low, according to Chandok. The prices of Amazon services vary depending on the specific service, particularly in storage, computing, and networking. The primary method for calculating these prices is based on usage time, aligning with AWS's pay-as-you-go model. AWS has reduced prices 129 times since its launch in 2006, a practice uncommon among other technology providers. AWS also has a dedicated team focused on helping customers optimise costs, reflecting their commitment to scalability. Unlike traditional on-prem infrastructure where hardware is purchased and used for several years, the cloud model allows users to pay only for the resources they consume. “As businesses scale, the expenditure on infrastructure and technology becomes significantly lower,” says Chandok.

On how soon AWS will hit its next billion and turn profitable is a question that Chandok answers in a cliché, “We're thinking for the next few decades.” That being the case, Chandok can worry about the RoI of his customers, AWS India’s profits can wait.

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