Amazon downsizes AWS in a fresh cost-cutting round

In a fresh round of layoffs, Amazon is laying off hundreds in the company’s cloud division, Amazon Web Services (AWS). The layoffs will affect AWS’ sales, marketing, and brick-and-mortar technology development teams.

This move comes as the company seeks to streamline its operations and focus on areas that deliver a better return on investment. “We’ve identified a few targeted areas of the organization we need to streamline in order to continue focusing our efforts on the key strategic areas that we believe will deliver maximum impact,” an AWS spokesperson said in a statement.

Amazon’s cloud computing division has long been a key driver of its profitability. However, the company faces intense competition in the cloud computing market, particularly from Microsoft, which has emerged as a formidable rival.

In terms of competitive positioning, Microsoft and Google posted strong year-on-year growth, with Microsoft increasing its global market share by nearly two percentage points from the previous year’s fourth quarter, according to a report by Synergy. “Google also saw an increase in its market share. Their fourth-quarter worldwide market shares stood at 24% and 11%, respectively.”

Despite maintaining robust double-digit growth rates, market leader Amazon witnessed a decline in its global market share, which “dropped to 31%.” These numbers underscore the intensifying competition in the cloud computing sector and hint at Amazon’s drastic decision to reduce its workforce to maintain profitability.

Rethinking physical retail strategy

On Tuesday, AWS also downsized its team responsible for developing technology for Amazon’s physical retail stores. This decision follows reports of a shift away from the “Just Walk Out” technology in larger Amazon Fresh grocery stores.

In 2018, Amazon introduced cashier-less tech “Just Walk Out” at a Seattle store. The system tracks items shoppers take and charges them automatically. It involves human moderators who review transactions and label footage remotely.

Just Walk Out was a pet project of Amazon founder Jeff Bezos. Bezos aimed to differentiate the company in the grocery market and eliminate waiting in lines, which he considered the worst aspect of physical retail. In his 2018 shareholder letter, Bezos expressed the vision of a store where customers could walk in, grab what they needed, and depart without delay.

The layoffs will impact a portion of the AWS identity and checkout teams within the Physical Stores Technology organization, wrote Dilip Kumar, vice president of AWS applications, in a message to employees, according to a report by GeekWire.

The layoffs follow Amazon’s largest job cut round 14 months prior, which saw 18,000 corporate roles eliminated as part of a cost-cutting drive after a pandemic-induced hiring boom.

Amazon has stated that these decisions, though difficult, are necessary to optimize resources and continue delivering innovation for their customers. The company has also committed to supporting affected employees through their transition to new roles within and outside Amazon.

This situation underscores the complex decisions companies like Amazon face as they adapt to a rapidly changing business and technological landscape.