Apple Builds Own Data Centers To Avoid Dependence On AWS

Apple is likely to transit away from rival Amazon's AWS cloud computing services.

According to AppleInsider, Brian Nowak, an analyst from Morgan Stanley, claimed that Apple might soon move away from Amazon Web Service (AWS) cloud computing offerings. Last month, in its quarterly earnings conference call, the tech company hinted that it might decrease dependence on AWS Cloud. The complete transition may take over two years.

Standing ahead of Microsoft and Alphabet, AWS parent – Amazon – is the top provider of infrastructure-as-a-service (IaaS). It lets customers rent data storage and computer servers via the Internet cloud. The proposed strategy will help Apple to reduce some expenditure, as last year, it has spent nearly $1 billion for AWS cloud services, fellow analyst ‘Katy Huberty’ estimates. For 2016 and 2017, the company is likely to pay the fees of $1.05 billion and $1.18 billion respectively to AWS.

Apple’s fees make up almost 6% of AWS revenue and if the Cupertino, Calif. firm moves away, then AWS profitability will be highly affected. The shift is not astonishing considering the competition between Apple and Amazon for consumer products.

Nowak stated in his report that the tech business is about to open three new datacenters. The datacenters expansion plan will take around two years and the company is reportedly spending $2 billion for its “global command center” in Mesa, Arizona. A sum of around $1.86 billion (1.7 euros) is likely to be spent on two data centers in Denmark and Ireland.

Apart from this, the $535 billion tech organization announced that in 2016, it would raise its capital expenditure by 30%. The budget is likely to be assigned to build datacenters for services like iCloud, iTunes, and App Stores. Allegedly, the datacenters will be built on approximate space of 2.5 million square feet. AWS datacenter facility is sprawled over the area of 6.7 million square feet – almost 40% more than Apple’s proposed plan.

Both Apple and Amazon were unavailable to comment. In fact, the Silicon Valley business has never announced officially that it has been availing AWS cloud services. A report, forwarded in 2011, indicated that it had been using both, Microsoft’s Azure and AWS, as its iCloud data storage support.

Stanley analyst, Nowak, has not given a definite figure of how much AWS would lose its data traffic and business. He expressed that AWS, due to its strong growth, has the ability to absorb losses. In 2015, Amazon’s cloud services division has reported commendable 69% revenue in its fourth quarter. Moreover, it has an annual run-rate of almost $10 billion. By the looks of it, the Apple’s shift from AWS may not be too harsh on Amazon’s subsidiary.

Apple has put immense importance on self-reliance. By detaching itself from public services, it can balance its superior operational ecosystem. Through its cloud services, it will be able to create greater efficiencies.

At the market close on Tuesday, Apple stock price stood at $94.48.