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From what I've heard, AWS prices for large customers like Netflix are a lot lower than for Alexa or Amazon Retail. Netflix has the option to switch to GCP or Az

From what I've heard, AWS prices for large customers like Netflix are a lot lower than for Alexa or Amazon Retail. Netflix has the option to switch to GCP or Azure; Alexa doesn't so they don't get those discounts.

AlexandrB 4y ago
What does it mean for Alexa to "pay" for AWS though? Is it recorder as revenue somewhere or does it just get accounted for internally?
- HDThoreaun 4y ago
  Probably means Alexa loses $10 billion instead of $9.5 or whatever and has to fire some more people
  - scott_w 4y ago
    MMAesawy gave the correct answer. It makes it clear what Alexa is really costing Amazon in an format that's easy to interpret. This is how most companies handle "internal purchases" from another business unit that also sells that product externally. Consider it this way: if Alexa doesn't buy that capacity, someone else could, so it's important to capture this opportunity cost. It's not perfect, however. I've seen examples where the repairs division of a company had to buy parts from its distribution branch at retail price. All well and good, so far. Except they then had to mark-up that part's price in the repair cost. Combine that with the fact distribution would give discounted rates to other repair companies to secure business and what you have is a repair division that's being outbid on price by competitors using the same parts!
    - HDThoreaun 4y ago
      Sure I was talking about what it means for alexa to not get the discount netflix gets. Obviously they need to account for the resources they use.
- TylerE 4y ago
  There are tax laws around this to you can’t cheat. I remember when I toured a large local forklift company (Brand you’ve probably heard of - big plant) and on the main production floor they had just about every OTHER brand of forklift. Someone asked and was told they had to pay full retail (including all taxes) on their own units, and they have to buy their competitors products for research… so, two birds one stone…
- deleted 4y ago
  [deleted]
- MMAesawy 4y ago
  Even if it's Amazon paying Amazon, there is an opportunity cost to using all those cloud resources. Every resource used internally is a resource not available for sale externally.
  - akiselev 4y ago
    One of the main selling points of the cloud is dynamic scaling which necessitates that Amazon have enough servers for some multiple of their customers’ base load. As long as internal Amazon resources are given a lower priority and booted in favor of customers during leak load, the opportunity cost is basically zero leaving just the marginal cost of electricity and hardware maintenance.
    - thrtythreeforty 4y ago
      I am fairly certain this does not happen. An internal AWS customer account can have numerous flags associated with it but "boot me out first" isn't one of them (aside from spot instances that everyone has access to). Source: work at AWS
laurencerowe 4y ago
That honestly surprises me. Having worked at a small subsidiary of a different big tech giant our costs for the big tech's cloud were charged at cost price at the behest of the accountants.
- sgerenser 4y ago
  No actual knowledge of the details, but the story I’ve heard at Microsoft is similar to the AWS one: internal users of Azure pay the same (based on volume and service level) as an external customer would. Supposedly their capacity constrained so any extra compute being used internally can’t be sold externally.
_vertigo 4y ago
I work in Retail and I’m pretty sure this isn’t true. I don’t know what AWS charges Netflix but there is an internal rate card and I’m pretty sure it’s just based on what it costs to run the machines.

AlexandrB 4y ago

What does it mean for Alexa to "pay" for AWS though? Is it recorder as revenue somewhere or does it just get accounted for internally?

HDThoreaun 4y ago
Probably means Alexa loses $10 billion instead of $9.5 or whatever and has to fire some more people
- scott_w 4y ago
  MMAesawy gave the correct answer. It makes it clear what Alexa is really costing Amazon in an format that's easy to interpret. This is how most companies handle "internal purchases" from another business unit that also sells that product externally. Consider it this way: if Alexa doesn't buy that capacity, someone else could, so it's important to capture this opportunity cost. It's not perfect, however. I've seen examples where the repairs division of a company had to buy parts from its distribution branch at retail price. All well and good, so far. Except they then had to mark-up that part's price in the repair cost. Combine that with the fact distribution would give discounted rates to other repair companies to secure business and what you have is a repair division that's being outbid on price by competitors using the same parts!
  - HDThoreaun 4y ago
    Sure I was talking about what it means for alexa to not get the discount netflix gets. Obviously they need to account for the resources they use.
TylerE 4y ago
There are tax laws around this to you can’t cheat. I remember when I toured a large local forklift company (Brand you’ve probably heard of - big plant) and on the main production floor they had just about every OTHER brand of forklift. Someone asked and was told they had to pay full retail (including all taxes) on their own units, and they have to buy their competitors products for research… so, two birds one stone…
deleted 4y ago
[deleted]
MMAesawy 4y ago
Even if it's Amazon paying Amazon, there is an opportunity cost to using all those cloud resources. Every resource used internally is a resource not available for sale externally.
- akiselev 4y ago
  One of the main selling points of the cloud is dynamic scaling which necessitates that Amazon have enough servers for some multiple of their customers’ base load. As long as internal Amazon resources are given a lower priority and booted in favor of customers during leak load, the opportunity cost is basically zero leaving just the marginal cost of electricity and hardware maintenance.
  - thrtythreeforty 4y ago
    I am fairly certain this does not happen. An internal AWS customer account can have numerous flags associated with it but "boot me out first" isn't one of them (aside from spot instances that everyone has access to). Source: work at AWS

laurencerowe 4y ago

That honestly surprises me. Having worked at a small subsidiary of a different big tech giant our costs for the big tech's cloud were charged at cost price at the behest of the accountants.

sgerenser 4y ago
No actual knowledge of the details, but the story I’ve heard at Microsoft is similar to the AWS one: internal users of Azure pay the same (based on volume and service level) as an external customer would. Supposedly their capacity constrained so any extra compute being used internally can’t be sold externally.

_vertigo 4y ago

I work in Retail and I’m pretty sure this isn’t true. I don’t know what AWS charges Netflix but there is an internal rate card and I’m pretty sure it’s just based on what it costs to run the machines.