News of Adam Selipsky’s departure from AWS may have shocked some industry stakeholders, but the last 18 months suggest the time is probably right for them to part ways.
Since becoming CEO in mid-2021, Selipsky has steered the company through choppy, often uncharted waters; a pandemic-fueled cloud surge, a marked industry spending decline, the emergence of generative AI, and something of a rebound.
AWS, like its counterparts in the global cloud computing industry, was soaring during the pandemic-era highs, recording solid quarterly revenue growth and maintaining its position as the dominant hyperscaler by market share.
But growth slowed significantly for AWS in 2023. In mid-2022, the cloud giant recorded 33% growth – by Q3 the following year, this had plummeted to just 12%. A sizable – and concerning – downturn for the firm.
Tracy Woo, principal analyst at Forrester, said Selipsky’s departure wasn’t a major shock when viewed through this lens.
“Selipsky’s departure is unsurprising. AWS has seen slower growth under his tenure,” she says.
AWS wasn’t alone in this experience, Woo noted. Both Microsoft and Google Cloud fell victim to the sharp spending plunge across the industry as enterprises rode a wave of macroeconomic challenges.
“Slow cloud growth isn’t necessarily a Selipsky issue but a cloud market issue,” Woo added. “All of the major cloud providers have seen slowed growth in the past 18 months.
“A tech recession downturn and the frenzied ‘cloud first’ mentality switching to a ‘cloud as necessary’ mindset slowed a lot of cloud spend from the hyper growth we were used to seeing the previous five years.”
Microsoft’s AI surge caught AWS and Selipsky off guard
For AWS, the issue wasn’t just sluggish revenue growth, though. Since the advent of generative AI, sparked by OpenAI’s launch of ChatGPT under the watchful eye of Microsoft, priorities have changed. Microsoft’s partnership with OpenAI gave it a distinct advantage over its main hyperscale rivals, with both AWS and Google Cloud taken by surprise.
At AWS re:Invent 2023, Selipsky used his keynote to poke fun at well-publicized issues surrounding AI safety and recent turmoil at OpenAI with CEO Sam Altman’s ousting and swift return.
While jokes at the expense of competitors are somewhat expected, it did point toward a degree of insecurity at the hyperscaler. Microsoft soared past the trillion-dollar market cap mark in 2023 and recorded impressive growth toward the latter stages of the year; all of which was fueled by interest in generative AI.
Lee Sustar, principal analyst at Forrester, said this raises serious questions about how AWS can keep pace with Microsoft’s growing dominance in the generative AI space.
It still has the financial clout and the coveted market share, but failure to innovate at pace and match Microsoft in this regard could cause serious problems down the line.
“AWS remains the market share leader by a long way, but the Microsoft/OpenAI combination has given Azure the initiative on bringing to market AI services as well as AI-infused versions of existing services,” he said.
“That poses a strategic question for AWS – do they mimic Azure’s approach by moving up the technology stack or stick with the ‘go built it’ approach that’s been so successful.”
Google is stirring, and AWS should be wary
While AWS has been sluggish to respond to Microsoft’s current dominance, Google has not.
Across late 2023 and into early 2024, the company made great strides in priming itself for a major battle with Microsoft. The launch of its powerful, multimodal Gemini models and the rebranding of Duet AI and Bard under this banner showed early signs that Google was stirring.
At Google Cloud Next in March 2024, the hyperscaler set the stage for this pending clash and appears to have fully articulated its strategy. With this in mind, AWS could find itself fighting a rearguard action on two fronts.
Sustar noted that this rapidly changing environment likely played a role in Selipsky’s departure. AWS may have come to the conclusion that new blood is needed to lead the charge in the year ahead.
“Google Cloud’s steady advance in the enterprise market – in part due its data, analytics and AI capabilities – adds to the competitive pressure,” Sustar said. “So far, AWS hasn’t signaled any shift in its approach – but the question of how to move forward likely figured in Selipsky’s exit.”
AWS has made positive strides
It’s not all bad news for AWS, however, with the company having made some significant progress in its generative AI strategy over the last 18 months.
The launch of Amazon Bedrock, which allows users to access a range of in-house and third-party large language models (LLMs), has been a roaring success thus far.
In July last year, just months after Bedrock launched, Swami Sivasubramanian, VP for database, analytics, and machine learning at AWS, said the company had already drawn “thousands of customers”.
AWS re:Invent 2023 saw the firm further outline plans for its generative AI offerings, with the launch of Amazon Q, its own AI assistant akin to Microsoft Copilot.
This was hailed as a highly positive move and by all accounts at the time was highlighted as a key differentiator for the firm in keeping pace with Microsoft. But Google Cloud has also made a foray into this space with the launch of Gemini Code Assist and new Vertex AI Agents.
Selipsky, to his credit, appears to have rallied the troops at AWS in a similar fashion to Sundar Pichai’s efforts in early 2023 to take on Microsoft. But so far neither have shown signs of inflicting a major, industry-changing blow.
AWS is confident it’s in safe hands
While it faces a major challenge in contending with both Microsoft and Google on the generative AI front, morale appears to be high at AWS.
In Q1 2024, the firm recorded 17% growth year-over-year, suggesting something of a rebound. Amazon CEO Andy Jassy’s comments on Selipsky’s departure also point to an optimistic outlook moving ahead.
“Adam leaves AWS in a strong position, having reached a $100 billion annual revenue run rate this past quarter, with YoY revenue accelerating again,” he said.
Selipsky’s successor, Matt Garman, currently serves as SVP for AWS sales and marketing and has been at Amazon for around 19 years. Jassy specifically highlighted the fact Garman has an intimate knowledge of the firm that will stand him in good stead.
Crucially, this could be exactly what AWS needs to press home its market advantage and mount a real challenge.
