Subject: Re: Reuters: Amazon saves 25% on shift to Linux
From: Michael Tiemann <>
Date: Tue, 30 Oct 2001 22:56:24 -0500

Administration costs as well.  With open source, Amazon can optimize how they 
choose to allocate resources, and they have much better visibility into what 
their systems are actually doing.  Thanks for the compliment,


P.S.  Sun does $800M/quarter in service revenue.  Our service revenue is a 
fraction of the $20M+/quarter we do.  So there's a lot of growth opportunities 
available for us at Sun's expense (although realistically, we don't offer a 
platform that competes with 64-way starfires...yet).


Karsten M. Self wrote:

> Summary:  Sun and Microsoft lose when Red Hat helps provide Amazon with
> $17 million on technology costs, likely realized through licensing and
> hardware savings.  Possible AOL-MSFT storm clouds on the horizon.
> Nod to Red Hat.  Administration costs, anyone?
> Tuesday October 30 4:32 PM ET
> Amazon Says Saving Money with Shift to Linux
>     By Scott Hillis
>     SEATTLE (Reuters) - Inc. (Nasdaq:AMZN) saw its technology
>     costs fall by nearly 25 percent in the previous third quarter as it
>     reaped the benefits of falling telecommunications prices and a shift
>     to the cheaper Linux operating system, the online retail giant said
>     in a regulatory filing on Tuesday.
>     Amazon's adoption of Linux mirrors experiences among other companies
>     that, eager to cut costs amid the faltering economy, are
>     increasingly using the open-source system as an alternative to
>     costlier software from companies such as Sun Microsystems Inc.
>     (Nasdaq: SUNW) and Microsoft Corp. (Nasdaq: MSFT).
>     Linux is an open-source operating system, meaning its code is freely
>     available, in contrast to proprietary products like Microsoft's
>     Windows which keep their code under lock and key.
>     By using Linux, corporations can use numerous computers without
>     paying a software license fee for each one, and can also customize
>     the system to fit their particular needs.
>     Linux's greatest success has been on the Internet, where it has a 24
>     percent market share on server computers, according to market
>     research firm IDC, which projects Linux will remain the No. 2 server
>     operating system behind Windows through 2005.
>     And as far as telecommunication prices go, according to Adam
>     Hamilton, an analyst with brokerage McAdams Wright Ragen, he figures
>     the company probably has also benefited from lower connectivity fees
>     it pays to keep its site up and running on the Internet.
>     In its third quarter, Amazon said it spent $54 million on
>     technology, down $17 million or 24 percent from the $71 million it
>     spent a year earlier, the company said in a 10-Q filing with the
>     Securities and Exchange Commission.
>     In the first nine months of the year, Amazon spent $189 million on
>     technology, compared to $200 million in the same period last year,
>     it said.
>     ``The decline in absolute dollars spent ... primarily reflect our
>     migration to a Linux-based technology platform that utilizes a
>     less-costly technology infrastructure, as well as general price
>     reductions for data and telecommunications services due to market
>     overcapacity,'' Amazon said.
>     An Amazon spokesman declined to give details of exactly how the
>     company was using Linux, what software it had replaced and how much
>     it was saving from that move alone.
>     ``We've always been pretty closed-mouthed about technology on the
>     back-end stuff, partly because it's pretty steep tuition and we
>     don't want other people going to school on our tuition,'' spokesman
>     Bill Curry said.
>     However, Amazon has a deal with Linux vendor Red Hat Inc.  (Nasdaq:
>     RHAT) to use its software to process secure electronic commerce
>     transactions -- the heart of Amazon's operations.
>     By embracing Linux, Amazon is edging away from the Seattle area's
>     high-tech powerhouse, Microsoft.  Analysts said while Amazon is
>     believed to use some Microsoft products, a recent deal with
>     Microsoft foe AOL Time Warner Inc. (NYSE: AOL) is probably pushing
>     it farther away from the software giant.
>     ``With the investment they took from AOL and the agreement to
>     provide AOL with a personalized shopping platform, I think they've
>     been gravitating toward the Linux-Unix anti-Microsoft camp,'' said
>     Hamilton.
>     But the shift to Linux started earlier when Amazon said in late
>     April it would begin moving a ``large portion'' of its systems to
>     Linux as part of a broader plan to cut costs and nudge the
>     money-losing company toward profitability.
>     Amazon Chief Executive Jeff Bezos is fond of saying his company is
>     better positioned than traditional retailers because it is based on
>     technology, the price of which falls over time, rather than real
>     estate, the cost of which constantly rises.
>     IDC operating systems analyst Dan Kusnetzky said it was no surprise
>     Amazon was saving millions by switching to Linux.
>     ``That's one of the reasons Linux is so attractive,'' Kusnetzky
>     said.  ``The software, and often the cost of the hardware that runs
>     on it, is considerably less.''
>     But now Amazon is facing flagging consumer confidence, a shaky
>     economy, and deep uncertainty about the future in the wake of the
>     Sept. 11 attacks.
>     Amazon shares fell 63 cents, or about 8.8 percent, to close at
>     $6.423 on Nasdaq Tuesday.
>     ``Whether or not they can make it to the promised land based solely
>     on that (technology savings), I don't think is true. They need the
>     economy to come back,'' Hamilton said.