AI fatigue, sales challenges, and the problem of getting big: Inside growing tension at AWS
- AWS is the top cloud provider. That success creates new challenges.
- AWS’s growth rate has slowed. In one part of the business, sales targets have been missed.
- Some employees suffer from ‘AI fatigue’ as the company pushes them to sell new AI services.
Amazon Web Services executives spoke for nearly 2 hours last month at an internal all-hands meeting, praising the team’s accomplishments over the previous year.
There was a lot to rejoice about. AWS has emerged as the dominant cloud provider and Amazon’s primary profit generator.
The festive mood, however, took a turn near the end of the meeting when an employee asked about the company’s treatment of its corporate workforce during a Q&A session.
According to a transcript of the meeting obtained by Business Insider, it often feels like “employees come last” at AWS due to its heavy focus on customer satisfaction. How did AWS intend to resolve that disagreement?
According to one of the attendees, the response was “dismissive.” Matt Garman, AWS SVP of Sales and Marketing, stated that he does not “accept the premise of the question.” He explained that AWS is simultaneously building strong customer relationships and a welcoming office environment.
“We have a do-both culture,” said Garman. “One thing I always tell people is I would never promise that working in AWS or Amazon is easy — it’s hard.” According to an Amazon spokesperson, Garman’s response was “cordial and respectful.”
Points of tension
The squabble is just one source of contention at AWS. According to more than a dozen current employees who spoke to BI, the company’s success has created new challenges, such as a declining growth rate, missed sales targets in one customer segment, and a more bureaucratic culture that is harming morale.
Rising cloud competition, punctuated by the emergence of generative AI, is causing internal strife, according to some employees. The sources requested anonymity because they are not authorized to speak to the press.
AWS is more important than ever for Amazon. Amazon’s cloud business accounts for nearly two-thirds of its total operating income. Year-over-year revenue growth, on the other hand, has been 12% for two consecutive quarters, the slowest rate since Amazon began disclosing AWS results in 2015.
Wall Street is keeping a close eye on things. In recent quarters, Amazon’s stock has fluctuated dramatically during some of its earnings calls in response to executive comments about the cloud business. This week, AWS will be in the spotlight once more as 60,000 people descend on Las Vegas for its annual re:Invent conference.
“Forward-looking AWS commentary is once again the single most important [key performance indicator] behind AMZN’s near term stock performance,” Bernstein analyst Mark Shmulik wrote in a recent note to investors.
AWS employees, according to Amazon spokesperson Rob Munoz, enjoy the “freedom to innovate” and have told the company that it’s a “great place to work.”
“These anecdotes do not represent the majority of our team’s experience.” Our innovative, customer-focused culture has helped AWS become the cloud leader, releasing AI and ML innovations on a regular basis, and will continue to power our invention,” Munoz said in an email statement.
Targets missed
According to two employees, AWS is falling short of sales targets in its startups and small-business segments.
One of the people said that the SMB team is definitely falling short of its sales targets for 2023, and that there is a lot of pressure on managers to get numbers up.
Another member of the startups team stated that the group was slightly behind schedule. This person was less concerned, however, because AWS typically grows on the back of a few successful customers, such as AI startups Anthropic and Hugging Face.
These difficulties are occurring as hundreds of startups fail. AWS is likely the cloud provider most vulnerable to this phenomenon because the company built its early lead by catering to startups better than competitors.
Many other aspects of AWS could be much better. According to Munoz, AWS had the highest absolute revenue growth of any cloud provider in the third quarter, adding $919 million in sales. Other cloud companies may report higher percentage growth, but they are starting from a lower base, he added.
“As we mentioned on our recent earnings call, AWS has signed multiple significant new agreements with customers that begin taking effect in Q4, but that will roll out over several months,” he said. “It’s typical that company’s cloud transformations happen in phases, and we continue to make meaningful progress across various segments, including Enterprise, ISVs, Startups, Digital Native companies, and SMBs.”
Burnout and attrition
Several AWS employees also expressed concern about high turnover.
Some of AWS’s most prominent executives have left in the last two years, including former SVP Charlie Bell, marketing chief Rachel Thornton, and data center VP Chris Vonderhaar. Employees said that the number of departures is trickling down to lower level managers and employees, in part due to burnout from having to do more work with fewer resources after losing a chunk of the workforce in layoffs earlier this year.
During last month’s all-hands meeting, the topic of burnout and attrition came up several times.
According to the meeting transcript, Peter DeSantis, SVP of AWS utility computing, stated that employee burnout can be addressed by being more vocal about it. However, as the company grows, it becomes “harder to stay connected” with employees, which often leads to a lack of communication between managers and the rank-and-file, he said.
“The thing that leads to burnout is not having a plan and not being able to change the things that are causing our stress,” DeSantis said in a statement. “And so if that’s not working, then as a group escalate and figure out how you fix it.”
During the meeting, another employee inquired about senior engineer attrition. In response, Prasad Kalyanaraman, AWS’s VP of infrastructure services, stated that having fewer people and resources can sometimes help because it forces you to be more selective about where you focus.
“It actually lets us build better products in my opinion because you’re actually being pointed about what features are needed,” Kalyanaraman said, according to the transcript. “I think it’s making us better.”
According to an Amazon spokesperson, “attrition among AWS employees has declined in recent years, and it’s inaccurate to suggest that there’s a problem with employee retention.”
‘Day 0.1’
Many AWS employees are concerned about how the company intends to respond to the rapid emergence of generative AI. While Amazon has been working on AI for decades, the release of powerful large models such as GPT-4, as well as tools such as ChatGPT and Bard, has propelled competitors Microsoft, OpenAI, and Google to the forefront of this new technology.
In the third quarter, Microsoft’s Azure cloud business grew 29% year on year, while Google Cloud revenue increased 22%, outpacing AWS’s 12% growth rate. Because these figures are calculated differently, making apples-to-apples comparisons is difficult. However, the pattern is clear: AWS’s competitors have begun to catch up. This is especially true for Microsoft, which has already reported that new generative AI products are contributing to cloud growth.
During last month’s all-hands meeting, the first AWS employee question was about Amazon’s strategic plan “to compete against Google and Microsoft” in this field.
AWS CEO Adam Selipsky responded that Amazon has a “differentiated plan” because no single application or model will “rule them all.” According to him, this is why Amazon launched Bedrock, a service that provides access to multiple models.
Selipsky added that the AI race is still in its early stages, and he shared AWS’ three-pronged approach of developing the chips that power AI cloud services, the models that process the underlying data, and the applications built on top of those models.
“It is still early,” Selipsky said. “I’m not even sure if it’s Day One.” “I’m not sure if it’s Day 0.1 or something.”
‘AI fatigue’
Nonetheless, AWS is encouraging its employees to become more involved in AI.
According to some employees, there is constant pressure to sell more of AWS’s own AI products and to adhere to a unified message of undermining competitors. According to one employee, their team is told to always try to sell AWS’s coding assistant app, CodeWhisperer, even if the customer doesn’t need it, which goes against the company’s leadership principle of earning customer trust.
Amazon is also scrambling internally to come up with generative AI projects, with CEO Andy Jassy recently stating that “every one of our businesses” is working on something in the space.
All of this is causing what some employees refer to as “AI fatigue.” According to screenshots obtained by BI, one AWS employee went on a rant about this late last month in an internal Slack channel with over 21,000 people.
“All of our leadership’s conversations revolve around GenAI, all of the conferences revolve around GenAI, all of the trainings revolve around GenAI…”It’s excessive,” the employee wrote. “I’m starting to avoid having conversations with customers about it because it’s turning into one big buzzword.” “Does anyone have any suggestions for dealing with this burnout or changing my mindset?”
According to an Amazon spokesperson, AWS is “seeing tremendous response to Amazon Bedrock and our other generative AI offerings.”
“Customers are responding to our differentiated generative AI approach which addresses all three layers of the stack, and companies are all starting to run new workloads using AWS generative AI capabilities,” he went on to say. “With a $92 billion revenue run rate and ~90% of the global IT spend still on-premises, we continue to be very confident about the future of AWS, and think there is a lot of growth in front of us in the coming years.”
Growing uncertainty
According to employees, as AWS has grown, it has become a much larger organization with a stodgier engineering culture, extra management layers, and slower decision-making. This is referred to as “Day 2,” and it marks a significant departure from Amazon’s fast-paced, entrepreneurial culture, which was famously dubbed “Day 1” by founder Jeff Bezos.
Maintaining a scrappy startup culture may be impossible for AWS, which now generates more than $80 billion in annual revenue. This is also one of the reasons for AWS’s slowing growth rate: The law of large numbers makes it difficult for larger businesses to continue expanding at the same rate. Despite this, employees believe that rising red tape is the single greatest challenge facing AWS.
Amazon is well aware of the situation. This year, Selipsky warned employees about a “Day 2” mindset creeping in, saying his “deepest fear” is AWS becoming a slow-moving organization. His boss, Jassy, also addressed this question several times, promising to fix the problems discovered in the engineering team. Amazon, for example, established a new “builder experience” unit last year to improve developer culture.
Automation and a big reorg
According to people familiar with the process, AWS is currently in the process of automating the billing system for most customers as part of this effort. AWS has long relied on a manual billing system, which is prone to errors, delays, and inaccurate invoice information. According to people familiar with the matter, Amazon’s most senior leadership team, known as the S-team, is directly involved in this project, with the goal of automating billing for 90% of AWS customers by the end of this year.
AWS’s sales and marketing team also underwent a major reorganization earlier this month, which eliminated overlapping roles and gave regional leaders more decision-making authority. According to those involved in the move, the move was long “overdue,” because several teams were reaching out to the same customers, increasing the overall cost and the number of people required to close a single deal. The reorganization was previously reported on by Geekwire.
According to an Amazon spokesperson, the restructuring of AWS’s sales and marketing team is “intended to better reflect customers’ needs,” and implying otherwise is “inaccurate.”
According to AWS employees, it remains to be seen how all of these changes will play out in the coming months. However, the uncertainty caused by layoffs and reorganizations earlier this year remains. The fact that Amazon made its employee tech survey less transparent this year by removing companywide results and only displaying team-specific results has fueled those concerns.
“The most significant single sentiment we feel is uncertainty,” one AWS employee told Business Insider. “We know there’s going to be changes — but nobody knows what they are.”
